Decided to buy your next car, or perhaps this is your first venture into the world of cars? Awesome! 😃 One of the many decisions you are going to make as an adult is buying a car. Yet, making this big purchase for the first time is not a simple decision. Will you go for a second-hand or new car? How will you buy it: with cash or car financing? And what car finance documents do you need to submit to get approved by the lender?
Getting a car through car finance is simple. But if it is your first time applying for one, you may have some questions like "what do I need to finance a used car?" or "what documents do I need to apply for car finance?" Here you’ll find helpful and straightforward guidelines on how to process your application.
In applying for car finance for a secondhand car, you’ll have to provide the lender with various information. Here’s the checklist of all the necessary documents needed to buy a car on finance
Your Personal Information
One of the most common documents needed for car finance is proof of identity. You have to provide the lender with your details such as full legal name, birthdate, marital status, and residential status, whether you rent, own a house, or are living with your parents. You are also required to provide them with your history of addresses for the last three years.
You can present your driver’s licence as proof of identity. It will also serve as a confirmation that you can drive. Car finance companies will likely reject your application if they see that you’re doing an “accommodation deal.” Meaning, someone else is applying for your car finance, or you’re doing it for someone else’s car finance. Lenders see it as getting around the system because a low credit score, for instance, will likely result in the rejection of an application. The application must be from the registered keeper of the vehicle.
Most contracts will indicate that the individual applying for the car finance should be the same individual registered as the car's keeper. Some finance companies may even require a selfie, which is an anti-fraud technique, to ensure that you’re the same person as pictured on the driver’s licence.
Another car finance document you need to provide is something to act as proof of address; some lenders will ask you to present a credit card or bank statement, tax bill, or utility bill to prove your address. This will help them verify who are who you claim to be, and avoid fraudulent applications. You'll certainly need to be a UK resident, at least over the age of 18, to be eligible for car finance, within the given terms and conditions.
Employment Status and History
To secure car finance, you must present information regarding your current employment, and salary. If you are running your own business, you can provide them with documents and tax records to serve as your proof of income. Sometimes a form from HMRC called an SA302 can be required to serve as proof of taxable income.
One of the car finance documents that you need to submit would be something to confirm your employment history. Ensure you have the names and addresses with your employers’ postal codes for the last three years. You may be asked for a more extended employment history if you have several gaps or have jumped from one job to another fairly quickly.
Other car finance companies will ask for your current employer’s information, such as name and contact number, though they won’t necessarily contact your employer. Payslips and current account entries showing revenue are generally enough to meet the employment verification process. This can be seen by the lender using a process called open banking, whereby you give permission for the lender to view your bank statements. Lenders are more likely to contact your employer if you're applying for a mortgage, rather than for car finance.
Proof of Income
Car finance companies need to be sure that you are capable of paying. You need to give them your bank account information for the monthly payments. The details include branch address, sort code, and account number. Of course, the account name should be in your name, and they may require previous bank info if you have less than a minimum of three years with the current bank.
Some providers such as Carmoola may offer a more simple way to pay, by adding your debit card on file and deducting your monthly payments each month. This is handy as it means your payments will be taken on exactly the same date each month (the one you choose in the app), and you can also use this payment method if you accidentally miss a payment and need to get back up to date a day or two late.
For more traditional lenders, you will also need to provide pay slips or bank statements to prove your earnings. Lenders ask for these documents to conduct an affordability check, which means checking your money management and making sure you can afford to pay the loan you are applying for. This process can also be advantageous to you by helping you avoid unnecessary financial difficulty, something you definitely wouldn’t want.
Car Financing Benefits
Most car buyers take advantage of car finance because it enables them to buy a car without having to pay a significant amount up front. To pay for the car outright in cash, you might have wait until you have saved enough, and that may take a long time to buy the car you want. Most people buy a car to conveniently get them to and from work, so it’s a necessity that needs to be met quickly.
To get your car quickly, you might opt to spread the cost over several months, making it more affordable. By signing a contract with the car finance company, it means you accept the condition of paying on a fixed price monthly. Having a fixed monthly payment will make it easier for you to set aside a budget every month. With car financing, you can choose a better car by paying reasonable monthly repayments, within your budget.
Preparing the necessary documents for your car finance in advance will help the application progress faster. In general, car finance companies seek proof that guarantees that you have a good credit standing and are capable of paying the loan.
By knowing the specific requirements you need to provide the car finance companies, you’ll complete the application quickly and smoothly. And you can also then accurately compare offers of different car finance companies.
Check Out Carmoola!
If you want a spread the cost of your purchase in a straightforward, quick and easy way then why not check out Carmoola! You can read about the car finance deals that we offer and see which one fits your financial situation best. You can also download Carmoola now and find out if you can get car financing with us! Once approved, you could soon be driving the car of your dreams. 😁