What to do if you’ve been refused car finance
Being refused car finance is more common than most people realise, and a single rejection does not mean every lender will say no. Lenders use different criteria, and what disqualifies you at one place may not be an issue at another. The first step is understanding why you were refused, because that shapes what to do next and where to apply.
Lenders assess applications based on a combination of credit history, affordability, and their own internal lending criteria. A refusal usually comes down to one or more of the following:
The refusal itself does not affect your score. What does leave a mark is the hard credit search the lender ran as part of assessing your application. That search is visible on your file for 12 months, though its impact on your score fades over time.
This is why it pays to use soft search tools before committing to a full application. A soft search gives you an indication of whether you are likely to be approved without adding another hard search to your file if the answer is no.
AutoMoney Trust uses a soft search at the initial stage of every application. You can check your eligibility on our apply for car finance page without it affecting your credit file.
Yes. Being declined by one lender, or even several, does not mean no lender will approve you. Mainstream banks and high street lenders tend to use automated credit scoring that declines anyone who does not meet a set threshold. Specialist lenders and direct lenders take a different approach, looking at your full financial picture rather than relying solely on a credit score.
AutoMoney Trust is a direct lender and considers applications from people with poor credit, CCJs, defaults. For more on what we look at when assessing an application, see our guide on how to apply for car finance.
When you apply for car finance, the lender will typically run a credit check to see your borrowing history, any adverse credit marks, and how much credit you currently have outstanding. Some lenders run a soft search first and only proceed to a hard search if the initial check is positive.
The credit check looks at:
For a full breakdown of how lenders use credit checks and what they are looking for, see our guide: credit checks for car finance.
If you have been turned down by multiple lenders, the options worth considering are:
If poor credit is the main barrier, our guide on car finance with a CCJ covers the specific factors lenders look at and what you can do to improve your chances.
There is no fixed waiting period, but applying again immediately after a refusal and a hard search is rarely the right move. Giving it at least 30 to 60 days allows the impact of the hard search to begin fading and gives you time to address any issues you found on your credit file.
If you are using a soft search tool to check eligibility before applying, you do not need to wait. Soft searches do not affect your file and you can run as many as you like.
Use our car finance calculator in the meantime to work out what loan amount and term would give you a monthly payment that is comfortably within your budget. Going into an application with a realistic figure makes approval more likely.
Car finance can affect your credit score positively or negatively depending on how you manage your agreement. Making regular, on-time payments can help build a positive credit history and demonstrate responsible borrowing, while late or missed payments can negatively affect your credit score and make it more difficult or expensive to access credit in the future.
If payments are not made on time, they may be reported to credit reference agencies, which can lower your credit score and make future borrowing more difficult or potentially more expensive.
When you apply for car finance, a lender may carry out a hard credit search, which appears on your credit file and can cause a small, temporary change to your credit score. This is a normal part of the application process and helps lenders assess whether finance is affordable and suitable for you.
For more information about how applications are assessed, read our guide on Credit Checks for Car Finance.
The main difference between fixed and variable car finance rates is whether the interest rate can change during your agreement. A fixed interest rate means your rate and monthly car finance payments stay the same throughout the finance term, giving you certainty over what you'll pay and making it easier to budget. In comparison, a variable interest rate can rise or fall over time, meaning your monthly payments may change.
AutoMoney Trust offers fixed-rate hire purchase car finance only, so you know exactly what your monthly repayments will be for the full term of your agreement. While fixed rates may sometimes be higher than an introductory variable rate, they provide protection against future interest rate rises and make it easier to plan your finances with confidence.
When comparing car finance options, it's important to consider not only the interest rate but also the APR, total amount payable, and the overall cost of borrowing. For more information read our guide on What Is Car Finance APR?.
The length of your car finance agreement can have a significant impact on both your monthly payments and the total cost of borrowing. Choosing a longer finance term, such as 60 or 84 months, spreads the cost of the vehicle over a greater number of payments. This can make your monthly payments more affordable, but it may mean you pay more interest overall throughout the agreement.
A shorter car finance term, such as 36 months, usually results in higher monthly payments because the balance is repaid over a shorter period. However, paying the agreement off sooner can reduce the overall amount of interest paid, making it a potentially lower-cost option over the full term.
When choosing the right finance term, it is important to consider your budget, monthly affordability, and how long you plan to keep the vehicle. The best option is one that allows you to comfortably manage your payments without putting unnecessary pressure on your finances.
AutoMoney Trust offers car finance terms from 36 to 84 months, giving you flexibility to choose an agreement that suits your circumstances. Use our car finance calculator to compare different term lengths and understand how your monthly payments and overall costs could change before applying.
Yes, you may be eligible for voluntary termination of car finance if you've paid at least 50% of the total amount payable under your hire purchase agreement. Under section 99 of the Consumer Credit Act 1974, customers have a legal right to voluntarily terminate your hire purchase agreement, provided the required conditions are met.
Voluntary termination (VT) of car finance allows you to return the vehicle and end your hire purchase agreement without making the remaining monthly payments. If you've paid less than 50% of the total amount payable, you may still be able to request voluntary termination, but you'll need to pay the difference before the agreement can be ended.
The vehicle must also be returned in reasonable condition, and any outstanding arrears or missed payments will need to be cleared before the agreement can be concluded.
Choosing voluntary termination on a hire purchase agreement may be recorded on your credit file and could be considered by future lenders when assessing applications. Before deciding whether this is the right option for your circumstances, we recommend speaking to AutoMoney Trust. Our team can explain the process, discuss any alternatives and help you understand the potential impact on your finance agreement.
