How Are Car Finance Decisions Made?

Getting the keys to a new car is a fun moment and one to savour. 😀 However, the paperwork part of buying a new vehicle isn't quite as exciting – especially if you don't know how getting finance works. You might be unsure if you'll be accepted, and the whole process can be daunting if it's your first time. 

Will you be approved? What documents do you need? How long will it take? These are all valid questions in the car finance approval journey. Worry not, though! You've come to the right place because we're detailing how car finance decisions are made in this handy blog, and also in our YouTube video 👇


The pre-application process

Before applying for car finance, it's worth getting all your ducks in a row and making sure there isn't anything that may hinder your chance of borrowing. Start by checking your credit score to see its current rating and if it needs improving in the short term.

Finding car finance might be trickier if you don't have a credit score. However, there are now more options on the market that factor in more than a high credit score when lending. So it's worth doing some research (or you could just use Carmoola) before applying. 

Understand the options on the market

What type of car finance do you want? There are more than a few options when it comes to financing your car, including personal loans, hire purchase (HP), personal contract purchase (PCP) and personal contract hire (PCH).  

Personal loan

Personal loans are the most popular way to finance a car and involve going through a bank, specialist car finance lender or loan company. You borrow the agreed amount with the lender and make the monthly repayments until it's paid in full. In some instances, you can get a car finance loan instant decision. 


Personal contract hire involves renting the vehicle on a contract lasting anywhere between one and four years. There's no option to buy at the end of the contract, and you hand back the keys to the dealer once it's finished. 


Personal contract purchases see you pay a deposit and then make monthly payments over an agreed period (usually between 12 months and five years). Then you have the option of one final balloon payment at the end of the contract to own the car outright. Or you can hand the keys back. 


With hire purchase, you pay an upfront deposit, which is typically around 10% of the car's value. This is followed by monthly payments until the end of the contract. During the contract, the company who leased you the car is still the legal owner until the final payment, at which point the car is yours. Much like PCP and PCH, car HP finance decision waiting times can vary but usually take a few days. 

Car finance checks

The checks involving car finance vary between lenders. And yet there are some common aspects, such as providing proof of identity and undergoing a credit check (even if some lenders place more emphasis on creditworthiness than others).

Proof of identity and address

You'll need to be able to prove your identity when applying for car finance. Lenders usually ask for a valid driving licence, as well as a utility or council tax bill showing you've been at your current address for the past three months. 

Proof of income

Expect a lender to ask for proof of income to ensure you can afford the monthly repayments. Lenders often ask for bank statements for the last three months, though they may want to see a copy of your tax return or your SA 302 if you're self-employed.

Employment details and history

You'll likely need to show your employment history to lenders, usually over the last three years. Lenders may ask for the name and address of your current employers, as well as previous places of work to help them make a decision on lending requirements. 

Credit score

The majority of lenders will review your credit score to help them decide on lending. Higher scores typically provide access to lower interest rates, though each lender varies with their criteria. In general, the better your credit score, the higher your chances of being approved for finance. 

How long does car finance approval take?

The car finance company may need some time to review all the details you provided. Therefore, it can take around one to two business days before you get a decision. The length of time depends on the lender, however.

Some are much quicker to reply and can give you an almost instant decision. Others will take a little longer as they pore over the finer details of your application. So, as a general rule of thumb, expect around one or two business days. For some drivers, the wait times can play important factors in a car finance decision and which lender they go for. If you're after a quick decision on finance, it might be worth using an online specialist lender where you can get an instant decision on car finance. Carmoola comes into this category and you will get a decision within minutes using our app.

What happens next? 

After all the checks, there are one of three possible outcomes in regards to your car finance appliances: 


If it's good news and you get an approval, you should receive follow-up instructions about when you will receive your finance. 


If the lender rejects your application, they have likely deemed you too much of a risk. At this point, you can search the market for other lenders or work on improving your chances of getting accepted in the future. 

More information

The lender may want more information and come back to you with a few questions about your application. At this point, your application is still under consideration and could return a positive outcome. 

Decisions, decisions, decisions

Understanding how car finance decisions are made helps to better navigate the process, as you'll know what to expect and what lenders look for. Hopefully, your application will get the green light, and you can start getting excited about getting a brand new car. 😃 🚘