Can I get car finance when receiving Universal Credit or benefits?

Looking for a new set of wheels, but wondering if you can get finance to pay for it while you’re on benefits? Being on benefits isn’t necessarily a barrier, and you could still get car finance and drive off into the sunset in the car of your dreams, but you’ll need to make sure you can tick all of the lender’s other boxes when you apply.

Can I pay for car finance with benefits?

Millions of people across the country receive benefits, so if you’re looking to get car finance while on benefits, you’re far from alone. 

Different lenders have different requirements - which is a good thing. It means there’s a decent chance you’ll find one that can offer you a car finance deal to make your dream of cruising the highway in your fab new ride a reality. 

Some lenders - but not all - consider some benefits as income, and they’ll take this into account when they look at your application. You’ll likely have a better chance of being accepted if you apply to these lenders, as long as you meet the other criteria on their wish list.

What types of benefits are accepted as income?

It depends on the specific lender, as they’re all looking for slightly different things. Annoyingly, lenders keep the specifics of their wish lists close to their chests, so it’s hard to say for sure which benefits they do and don’t accept as income.

But generally speaking, if you get any of these, they could count as part of your income: 

• Universal Credit
• Housing benefits
• Disability living allowance (DLA)
• Carers allowance
• Personal independence payment (PIP)
• Income support
• Child tax credits
• Working tax credits

What will affect my eligibility?

When you apply for car finance, the lender will want to make sure you can afford the repayments, and that you have a decent credit history.

Before a lender decides whether they can offer you a car finance deal, they’ll do an affordability check. This is where they look at your income and your major outgoings to make sure you have enough room in your budget to make the monthly repayments, on top of any other bills and financial commitments you might have. 

It might feel like they’re asking for a lot of information, but they’re not doing it just to be nosy - it’s so that they can be confident you’ll be able to keep up your repayments.

The lender will also check out your credit history. This will show them how you’ve managed your finances in the past, and will help them decide how much of a risk they would be taking by lending to you.

Can I get car finance on benefits with bad credit?

If you’re on benefits, and you also happen to have a credit history that’s not exactly amazing, you could still get approved for car finance. But, you might find that you have to pay a higher interest rate.

There are plenty of reasons why your credit might not be great - you might have missed the odd payment here and there, you might have been declared bankrupt, or it might be that some of the details on your credit file aren’t right. 

Don’t let your credit score put the brakes on your plans - there are lenders out there who will offer car finance to people who have poor credit, so your credit score doesn’t have to be a roadblock. 

If you’re in this situation and you’re applying for car finance, chances are that if you’re accepted, you’ll be offered a higher interest rate. This will mean higher monthly payments. It’s important to take this into account, and make sure you can still afford to make the repayments.

There’s plenty you can do to help improve your credit score, to put you in a better position to snag better deals in the future.