How Many Payslips Do I Need To Get Car Finance?
If you’ve recently changed jobs and are thinking about buying your next car on finance - we’ve got you covered. Car finance providers ask for a certain number of payslips so that they can check if you’re eligible for a loan. So if you’ve recently changed jobs, you might not have a sufficient amount of payslips to show for it. No worries, though. Don’t let that shatter your dream of a new car. Let’s get into our detailed guide to proving your income for car finance and other essential tips you’ll want to know!
How Many Payslips Do I Need To Get Car Finance?
Car finance companies generally want three months' worth of the applicants’ most recent payslips. With these, they’re able to evaluate whether or not applicants can afford the monthly repayments for the car loan. Lenders are obliged to check your income because they need to be sure you can pay back the loan before they give it to you. Essentially, payslips are easy proof of your income. You’ll therefore need to provide three monthly payslips as a part of your car finance application. This is generally valid for all car finance providers and is also a part of the requirements for a car loan from a bank.
Want to learn more about payslips and if they're really needed for car finance applications? Watch our handy YouTube video 👇
Car Finance Requirements UK
Along with payslips to prove your income, there are other crucial documents and factors related to car finance. If you get them wrong, you’ll end up risking getting your car finance application rejected. That’s why it’s really important to spend time researching these beforehand. So without further ado, let’s look at some of the main car finance requirements in the UK.
Entering into a car finance agreement with the lender is a huge commitment. You’ll be paying a fixed amount every month for the next few years. So, before jumping in, it’s best to be realistic about your finances and how much you can actually afford for the car finance repayments. If you're not sure how to assess this, read our blog that answers this common question: how much car finance can I afford?
A Sufficiently Good Credit Score
When you apply for car financing, you will undergo a hard credit check. Car finance companies will check your credit history and financial status through credit agencies. You can check your credit rating before you apply so you can see if there are any errors in your credit history.
By knowing what your credit score is, you can predict what interest rates will be offered to you by lenders. If you have an excellent score, it’s more likely that you’ll get cheaper deals. However, if your credit rating is not that great, prepare to pay higher interest since lenders would see you as a riskier client.
If your credit score is good, you’ll be much more likely to be accepted for car finance, and you’ll have access to much lower interest rates. The higher the interest rate, the more you’ll have to pay on top of your loan every month. That’s because lenders consider candidates with lower credit scores as riskier applicants, so they charge more for a loan. Consider working on your credit score before you apply for car finance if you’re worried about it being too low. You can read our guide to credit scores if you need guidance.
The Ability to Repay your Car Loan
Your car finance provider will first want to assess how much they reckon you’re capable of paying every month. They’ll only allow you to take out a loan if they think you have sufficient income to do so comfortably. A good tip is also to have your own budget for this, making the calculations even before you apply for car finance. That way, you won’t get any unpleasant surprises later down the road (no pun intended 😉).
When you have a figure in mind for the monthly repayments, don’t forget to include costs for maintenance and servicing, insurance, road tax, and fuel. Aside from these expenses, you also need to think about how long the loan term will be. Remember that a longer loan term means cheaper monthly payments, but overall, you’ll pay more interest.
The Right Set of Documents
In order to apply for car finance, you’ll be asked for your basic personal information from your lender, like:
- Your full name
- Your date of birth
- Your marital status
- Your residential status
- Your address history for the last three years
You’ll need to verify your identity by providing a copy of your driver’s licence, and for other car finance companies, you might need to provide additional ID like your passport. To prove your address, you can show some of your recent utility bills or bank statements. These documents will have to show your name and current address.
Next, you’ll need to prepare your employment history throughout the past three years. The car finance company will ask for the names and full addresses of your employers. Bear in mind that they could reach out to your employers to check whether or not you really did work there. Also, you’ll need to include your current job position and salary if you’re employed.
If you’re self-employed or a business owner, you’ll want to prepare documents that will serve as proof of your income. It could be bank statements and/or SA302 for self-employed applicants, as well as payslips for those who are employed.
Choosing the Right Car Finance Deal
There are several car finance deals that you can choose from, which will all depend on your personal financial situation. The most common arrangements for car financing are Personal Contract Purchase, Hire Purchase, and Car Leasing.
At a glance, they all seem quite similar. However, they are fundamentally different when it comes to the monthly repayments and the consumer rights stated in the agreement.
Personal Contract Purchase (PCP) is a popular choice because it offers the most affordable monthly payments. By the end of your contract, you’ll have three options: pay the final payment or "balloon" payment in order to own the car, return the vehicle, or get a new car.
The HP deal has higher monthly payments because you get to own the car outright at the end of the contract. You don’t have to make a final payment like in PCP. Lastly, car leasing is a lot like renting a vehicle but long term. You will make monthly payments, but you have to return the car when your contract expires. These payments can be expensive but will most likely include extras like insurance, servicing, etc.
The Bottom Line
Securing a car finance deal will make it so much easier for you to have a car. You get to enjoy the freedom and convenience of having your own ride. Plus, the payments are spread throughout the loan term, allowing you to budget your money for monthly repayments.
As for the required documents for your application, check that they are all correct and valid to ensure that you’ll have the best chance of getting approved by the car finance company. That’s why it’s important that you supply the right amount of payslips in order to get car finance.