Car Finance and Affordability

When you come to buy a car on finance, you need to consider what you can afford before applying for a loan.

If you've ever applied for a loan or taken out some sort of finance, you would have likely discussed affordability with the lender.

During your application process, you would have been asked a series of questions about your income and lifestyle, and a thorough background check on your credit history would have been performed.

It can be a difficult and frustrating process for you, especially if you are unsure if you will be accepted, but it's something that every lender must do to ensure you will be able to afford and pay it back.

Do you know your car's equity position? Find out today by signing up to Car Credible for a full car finance appraisal.

Check your deal now

Once a lender has worked out your monthly income and expected outgoings, they will be able to see what your disposable income looks like and how much you may be able to pay them back each month.

If however, it appears you would be left with little to play with after everything else has gone out of your account, you may find it difficult to convince them you will be able to repay them over time.


Car finance repayments tend to last anywhere between 24-60 months, so it's a huge commitment that must be adhered to every month or else risk losing your car and potentially amassing debt and poor credit history.

You may think just by looking at - and experiencing - your monthly incomings and outgoings that you can afford to make fixed monthly repayments across several years, but ultimately that decision does not lie with you.

They will also assess what would happen If the worst was to happen and you lost your monthly income for whatever reason and whether you would still be in a position to make the repayments without falling into debt or having to sacrifice other debts.

Before applying, you should create your own budget of what you can - and can't afford - as well as weigh up all of the other costs that come with owning a car such as the general day-to-day running, including fuel, insurance, and servicing.

It will mean you don't overstep the mark of what you can genuinely afford, and also means you have a good idea of what you can expect from the lender.


Different types of car finance

There are several different types of car finance loans you could take out and one may benefit you more than another based on your affordability.

Your lender will be able to help point you in the right direction of a certain type of car finance based on your credit and borrowing history.

We have previous articles on the pros and cons of different types of car finance but generally, if you took out a Hire Purchase (HP) deal you may be paying back more per month than you would a Personal Contract Purchase (PCP).

Once you are approved by the lender, a number of factors such as the deposit you put down, the length of the term, and the APR you are offered will also massively impact the amount you can expect to repay each month.

Check your deal now


How much of my monthly income should I spend on car finance?

Financial experts have suggested that you should spend no more than 10% of your monthly take-home pay on car finance. So for example, if you take home £2000 per month, your car finance repayment should be no more than £200.

What do lenders look for when you apply for car finance?

Lenders will look at your credit history to determine whether or not you will be able to afford and make your monthly car finance repayments. If they believe you can do that, on top of your other outgoings, then it's likely you will be approved your car finance loan.