Can I Get Car Finance if I've Just Moved to the UK?
If you've just recently arrived in the UK, firstly welcome! But if you're now looking at how you can get a car on finance, we'll share a few important steps if you're looking to finance a car.
If you don’t have a sufficient credit score yet but want car finance, don’t worry. Here's our guide to getting car finance for new UK residents and getting you on the road fast! 🚘
If you'd prefer to watch and listen, Jade has created a video on this topic for you!
How to Apply for Car Finance After Moving to the UK
There are several different ways of getting car finance in the UK. You may try applying for a Hire Purchase agreement, Personal Contract Purchase (PCP), car leasing, or a personal loan.
We won’t go into too much detail about the different types of car finance here, but if you want to learn more, you can head over to our in-depth guide on car finance vs. loan.
Requirements for Car Finance Application
For most of these car finance agreements, you’ll have to provide a set of documents to apply. It’s important that you are aware of these requirements so that you know how to prepare for your car finance application as soon as you move to the UK.
Full Driving Licence and Other Valid IDs
When you apply to car finance, you’ll have to have at least one form of valid ID on hand, preferably your full driving licence. Some car finance companies and lenders also accept passports. If you apply for financing with Carmoola, you will need a full driving licence first.
During your application process, you only need to hop onto our app and do a fully digital ID check using your driver's licence. No need to send physical copies of your ID. Every step of your car finance application is done on our app.
Proof of Income
Applying for car financing means you have to prove to the lender that you can afford to pay the monthly repayment amount throughout your agreement period. That’s why you will be asked for proof of your income.
Typically, you will need to show three months’ worth of payslips if you’re employed full-time or a recent bank statement if you're self-employed. Some lenders might contact your employer to verify your employment status.
Proof of Residence in the UK
Car finance companies see to it that they minimise the risk of lending money to borrowers. They do this by checking your proof of residence in the UK. This is what’s called traceability, and it’s a really important part of your car finance application.
In the event that a borrower can no longer repay the loan, lenders want to ensure that the borrower can be contacted. In your application, you need to provide a with proof of address, which could be:
- A utility bill that’s less than three months old - gas, water, electricity, or landline.
- If you’re a tenant, you could show your current tenancy agreement
- Your council tax bill
All of these will need to show your correct address and full name. It’s a good idea to check that they’re all recent documents, or the lender may need to perform further checks.
These requirements are not only for new UK residents. You’ll be asked to supply these car finance documents regardless of how long you have lived in the UK and the status of your credit score. But it's always a good idea to improve your credit score first before applying.
Can new UK residents apply to any lender?
Unfortunately, not all lenders offer car financing to new UK residents. Some car finance companies require borrowers to have three years’ worth of UK address history before they offer car finance.
If you just moved to the UK, this can be incredibly frustrating, especially if you know you can afford the repayments without any hassle. The best thing to do to would be to build a good credit history as soon as you settle in the UK.
How do lenders check credit histories?
Car finance companies and lenders check every applicant's credit history and score before offering a deal. If you’ve just moved to the country, there's a chance you may not have a comprehensive credit score, so you might find yourself in a difficult situation when having to prove your creditworthiness.
Lenders use a credit-scoring system because it shows a detailed description of your previous financial history, from debts with other creditors to whether or not you’ve had any County Court Judgments, have been declared bankrupt, or other factors that may have affected your credit score negatively.
Your credit report is also useful to car finance providers because it is a good indicator of how well you have repaid loans in the past.
Do credit histories in other countries count?
Unfortunately, in most cases, your credit score doesn’t follow you from one country to another. So, even if you have demonstrated you can borrow responsibly and manage your finances in your previous country of residence, your credit behaviour won’t follow you to the UK.
This can be incredibly frustrating since you're essentially starting from scratch. But it’s not all bad news. The lending landscape is changing, with an increasing number of flexible car finance solutions for UK drivers looking for budget-friendly ways to buy a car.
What to Do If You Can't Get Car Finance Yet
Ultimately, the only thing you can do if your non-existent credit score is preventing you from getting a car loan is to build it up. There are different ways of working on your credit score, including:
- Registering to vote on the electoral register as soon as possible
- Taking out a micro-loan from a company specialised in credit rebuilding
- Paying all your bills on time if you do so through direct debits
- Staying within your credit card limits
- Not making many loan applications at once (for any type of credit)
Improving your credit score can take a bit of time, but if you play your cards right, you may be able to borrow money for a car in less than a year.
Finding the Right Car Finance Deal in the UK
The best car finance deal for you would be one that fits your needs as well as your budget. You may want to start by checking the Annual Percentage Rate (APR) of various car finance deals from different lenders.
The APR includes the interest rate and other fees you need to consider when financing a car. So, the lower the APR being offered, the better.
Be sure to check our guide on how to get the best car finance deal! You'll learn everything you need to know to make finding the right car finance company a lot easier.
FAQs on Car Finance for New UK Residents
Can I Apply for Car Finance After Just Moving to the UK?
Yes, new UK residents can generally apply for car financing. However, there are a few factors to consider, such as credit history, residency status or visa type, proof of income, and address verification.
If you've just moved to the UK, be sure to check with the car finance company to confirm if you meet the requirements when applying for car financing.
What Documents Do I Need for Car Finance Application After Relocation?
- Proof of Identity: Typically, a valid passport, national ID card, or driver's license.
- Proof of Address: Utility bills, bank statements, or official correspondence that shows your current UK address.
- Proof of Income: Recent pay stubs, employment contracts, or tax documents to demonstrate your income and affordability.
- Credit History: Lenders might request permission to access your credit report to assess your creditworthiness.
- Residency Status: Documentation proving your legal residency status in the UK, such as a visa or residence permit.
- Bank Statements: Recent bank statements to show your financial stability and transactions.
How Does Credit Score Affect Car Finance Approval After Just Moving?
A new UK resident typically does not have an established credit score in the UK upon arrival. Credit scores are based on an individual's credit history, which includes their borrowing and repayment behaviour over time.
Since new residents would not have had any credit activity within the UK, they would not have a credit score immediately.
For new UK residents, it's essential to start building a credit history as soon as possible by opening bank accounts, obtaining a UK mobile phone contract, and possibly applying for a credit card or small loan specifically designed for individuals with limited or no credit history.
Car Finance Options for Those Who Just Moved with Limited Credit History
- Guarantor Loans: Some lenders might offer car financing to new residents if they have a UK-based guarantor with a good credit history. The guarantor agrees to cover the payments if the borrower can't.
- Specialist Lenders: There are lenders that specifically cater to individuals with limited or no UK credit history. They might offer higher interest rates initially but can help you get started with building your credit.
- Credit Builder Cards: These are credit cards designed to help individuals build or improve their credit scores. They often have low credit limits and higher interest rates, but responsible use can help establish a positive credit history.
- Secured Loans: Some lenders might offer secured car loans, where the car itself acts as collateral for the loan. This could help secure financing even with a limited credit history.