Why Was I Refused Car Finance?

Getting car finance should be straightforward but it can be challenging. We look at the five ways why you may be getting refused a loan.

Buying a car is one of the most expensive things you can buy in your lifetime, behind property, and there's a reason why more than 90% of new cars get bought using some form of a financial plan.

Some people don't want to be tied down to finance and opt to buy a vehicle outright with cash. If you can do that, you have done well with your savings, but that's not possible for many others.

Taking out car finance offers you the flexibility you don't get if you buy outright with cash, and we reviewed all the types of car finance and why you should go for it if unsure in a previous article.

Do you have a car on finance and would like to reduce your monthly repayments? Sign up with Car Credible today; we could help you save money on your deal.

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Applying for car finance is generally simple. All you need to do is supply personal information, including your address, employer, salary, and more so that a lender can do a credit check on you to ensure they are comfortable lending you the money required.

While many people are successful in this application process, for others, it can be a disappointing turn of events that leads to rejection and the inability to apply for car finance.

If you aren't approved, you may be confused why, especially if you were confident that everything was sufficient when applying. There are five main reasons lenders reject applications, and we summarise them below to help those who can't get finance perhaps understand why.

You have poor credit

The most common reason why lenders may refuse your car finance application is that you have poor credit. Credit is the most important thing that lenders look for when looking at borrowers because they need to be sure that you will be able to repay the loan.

Your credit history is critical when applying for a loan because this will immediately tell lenders how you have managed finance deals in the past, whether you paid it off, and if you missed any monthly payments.

Your credit history helps to shape your credit score; if you are borrowing beyond your means, your credit score is likely to be way below the national average, potentially harming your chance of approval.

Another possible reason you may get refused due to credit reasons is you haven't built up a credit history. If you are a young driver, there's a chance that you wouldn't have needed to take our finance previously, and therefore there is no trail of you making repayments in the past.

If you have poor credit and are refused car finance from one lender, you mustn't jump from lender to lender to try and secure a loan. By doing that, you risk the applications and rejections appearing on your credit history, which will deter other lenders from offering you a loan anytime soon.

If you get refused, take some time away from applying and research lenders who offer borrowers with bad credit a loan. That way, you can target those you have more chance of approval with; it will help stop your credit score and history from decreasing further.

Current employment status

If you are out of work when you apply for car finance, there's a chance that a lender will be reluctant to approve your application. That's because they need to be confident you are in a financially stable position to make the repayments.


While being on universal credit or other out-of-work finance schemes makes it harder to get approved for a car finance loan, it is not impossible, and particular lenders out there can help those people.

If you know that you will be getting back into full-time work soon, then it's possibly worth waiting until then before applying to give yourself a better chance of being approved.

If you are out of work but have a good credit history and can prove that you can make your repayments without regular income coming in from an employer, you should have no trouble getting approved.

Your eligibility

Lenders have different requirements when approving car finance applications, and just because one lender has refused you doesn't mean another will do the same.

However, before applying for finance, you should check the lender's eligibility criteria to see if you meet their expectations. That way, it will give you an idea of whether or not you will get approved before applying.

If you are rejected by one lender, despite doing your research and feeling confident about approval beforehand, don't let it put you off, as one lender's criteria may be stricter than another.

Be cautious about applying too regularly, as you could severely impact your credit score and make future applications even less likely to be approved, which could harm you for a long time.

Your age

Some lenders are only willing to offer finance to those over 18, so if you are 17 and just passed your driving test, you will have to wait until you turn 18, or you could get a guarantor car loan.

Some lenders have an age cut-off point, and if you are over 70, there may be some reluctance to approve your car finance loan application because of a lack of credit history. You'll more often than not be retired and, therefore, not bring in any monthly income from a job.

If you're between 18-70, you'll have more chance of getting approved unless you fail to meet some of the other criteria required, with a lack of credit history likely being the cause for younger or older applicants.

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When you apply for a loan, a lender looks at your credit history and all of the personal information you've submitted before approving or rejecting your application. Lenders are responsible and want to ensure they will get their money back, so if there is any information you've provided that could cause them to doubt your ability to make repayments, you may get refused.

One of the most important factors a lender will look at is your income. If you want to borrow £20,000, for example, repaying £300 per month across five years, but after all of your other bills and repayments, you'd be less with an insufficient amount to live on, a lender will decline your application.

Before applying for car finance, you should use our car finance calculator to help you get an understanding of what you can afford. It will give you an idea of the type of car you can go for and your chances of approval from a lender.

If you believe that your affordability is strong and you get rejected, there's a chance that one of the above factors is the reason why a lender has deemed you unsuccessful in your application.


What do I do if I can't get approved for a car loan?

If you are refused car finance, try not to panic; there are still options that you can try. You could nominate a guarantor to step in and help make your repayments if you are unable to. They should be a close family member with a good credit score. Or you could research lenders that approve those with poor credit which may prove more successful.

Does getting rejected for car finance affect credit score?

Getting rejected for car finance does affect your credit score because a hard credit check would have been made on your profile and this shows up in your credit history. It's therefore important to research before applying to check lenders' eligibility criteria to see if you are likely to be approved beforehand.

Can you reapply for car finance?

You can reapply for car finance but it can be risky as every time you apply, it appears on your credit history. If you get rejected and then apply with another lender, they will see you were previously refused and may be less likely to accept you. You should be confident that you'll be approved by a particular lender before applying.