How to get car finance without a credit history

Passing your driving test is one of life’s rites of passage, and once that’s out of the way, your eyes are set firmly on getting a car and hitting the road.

But actually buying a car can be even more difficult than learning your theory and accomplishing parallel parking combined, as you have to find the means to pay for one — James Fairclough, CEO of AA Cars digs into how you can access car finance, even without a credit history.

Car finance splits the cost of the vehicle into more manageable monthly payments, breaking down the cost and broadening the buyer’s choice. This makes it a very popular choice for younger drivers, who might not have the savings to buy a vehicle outright without compromising significantly on the make, model and age. There is also plenty of flexibility over the term length and repayment options that getting a bank loan does not always offer.

It is undoubtedly a great way to purchase a car — but it often relies on having a credit history, built up by demonstrating how much money you have borrowed in the past and how well you have managed your cash to pay the loans back.

Not having a credit history does make things more difficult as it’s what lenders use to assess your ability to make repayments. But if you are still living in student halls or at home, you don’t necessarily have a long track record of paying bills behind you, so how do you access car finance without a credit history?

Thankfully it is not an impossible hurdle to leap, and there are ways around it.

Firstly, there are some basic requirements to access car finance: You must be 18, hold a full UK driving licence and be able to afford the monthly rental cost of a car.

To make your application more appealing, make sure you’re on the electoral roll. Lenders look at this when they perform credit checks to see if your name and address match up. Being on the roll makes these checks easier for lenders to carry out.

If you’re old enough to buy a car, you probably have a current account. Regularly using your account, without going overdrawn, can demonstrate you have a good understanding of your finances and can manage your money.

Any regular direct debit payments, such as paying for a streaming service or your monthly phone bill, will prove you can make regular payments on time.

If you are still struggling to build up enough history to satisfy a lender, you could arrange a guarantor loan, where someone else (usually a relative) signs the finance plan and is liable if you miss payments.

The guarantor must have a good credit history, and they often have to be homeowners, so your parents may be best-placed to help. Don’t forget, though, that your guarantor’s credit rating and yours rely on you paying on time every month, so you must ensure that you can meet the payments requirements.

It’s worth noting that inquiring after your eligibility for car finance deals can leave a footprint on your score, but certain sites, such as AA Cars, run a soft credit check so you can see what products are available to you without leaving a mark on your history.

Once you are approved for a loan, not only do you have a car to take onto the road, but you are well on your way to building up your credit history. When you are first accepted for a loan, your credit score might go down but after a few months of repayments, this picture will look more rosy.


James Fairclough, CEO of AA Cars