When applying for finance for a new or used car, you will need to provide various information, documents and proofs of identification to the finance company so they can assess your application. In addition, they will access information held about you by third parties and check any employment references you provide.
What information does the finance company want? Well, they first need some basic information so that they can consider your application. Once the application has been approved, they will need some formal identification documents, and possibly proof of income, before the final contract is signed off. If you can’t provide acceptable documents to back up the information you have provided, your finance application will be declined.
Firstly, you need to provide the following personal information as part of your finance application. This is in addition to the specific details of the car you are buying, plus the exact deposit and monthly payments you are planning to make (every finance application is very specific to a particular car and payment profile; it’s not a general application for car finance).
You will need to provide your full name (and previous name if you have changed it), date of birth, marital status, residential status (own your home, renting, living with parents, etc.) and your full address history for at least the last three years.
Employment details and history
You will need to provide name and address of all of your employers for at least the last three years (potentially longer if you have changed jobs a lot or have gaps in your employment history). This includes full addresses with postcodes, so make sure you have all of those details.
You will need to provide your job title and salary (current and potentially for the last three years). If you are self-employed, you will need to provide accounts or other documents as proof of income, since this information can’t be easily checked by the finance company. If you run your own limited company, they will at least be able to check the details with Companies House.
You need to provide the bank account details for the account you will be using for your monthly payments. You will need the branch’s address and sort code as well as your account number. The account usually needs to be in your name (or jointly in your name). Again, if you have less than three years with your current bank, you will probably need to provide previous bank details.
What if I don’t have three years’ history for my application?
It’s a common problem that, for several reasons, you may not be able to provide three years’ history for all of your application. You may have only recently moved to the UK and therefore not have three years of residential or banking history here. You may have only entered employment in the last year or so. This is not necessarily a problem, but the finance company will need to know as much as you can tell them. If you are applying for finance over at least three3 years (which most car finance is), but you can’t tell them where you were and what you were doing for the last three years, it doesn’t make you look like a safe bet for their money. It may adversely affect your application, depending on your circumstances, so speak to the dealer about what other information you can provide.
Some finance companies will make overseas checks, so they can verify your previous address in other countries. Other companies may be less accepting of applicants with less history, but it varies across the industry. Young adults applying for finance are often asked for a guarantor if they don’t have a lot of employment or credit history, but again it varies.
Once you have provided this information to the finance company, usually via the business manager at the dealership where you are buying the car, they can process an application for you. All going well, your application will be provisionally approved by the finance company, subject to you providing some required documents to confirm that you are who you say you are. In some cases, you will also need to provide proof of income (usually for self-employed people).
Identification documents required for car finance
It is expected that if you are applying for car finance, you have a driver’s licence to be able to drive the car you are trying to buy. Most finance companies will automatically reject a finance application if you don’t have a driver’s licence, as it would almost always be considered an accommodation deal (ie – you are taking out finance for someone else, which is not allowed).
Up until now, you have needed to provide both parts of your UK driver’s licence (photo card and counterpart), however the rules are changing in response to the cancellation of the counterpart licence (the paper bit). The dealership will be able to tell you what documents their finance company requires.
What if I can’t find my licence?
If you can’t find your driver’s licence, or have sent it back to the DVLA for penalties to be added, etc, then you will need to provide additional personal identification. This is usually a passport or a similar ID document, and the dealer will be able to tell you what their finance company requires. The finance company will also contact the DVLA to confirm that you do actually have a driver’s licence.
Proof of address
Most finance companies will ask for up to two proofs of address, to prove you live where you say you do. These are usually utility bills (eg – gas, electricity, council tax, etc.) and you have to be named on the bill (joint names is fine, as long as you are on there). You can often also provide bank statements (although some forms of bank statement are not accepted). You are allowed to block out any payment information you like, such as expenditure or income, for proof of address identification, so you don’t have to worry about people seeing sensitive financial information on your personal documents.
These proofs of address usually need to be dated within the last 90 days (three months), so make sure you don’t take in bills which are older than that or they will be rejected.
Proof of income
Depending on your employment details and history, you may be asked to provide proof of income. If you use an accountant for your bookkeeping, it is usually easiest to get the dealership to call the accountant (or vice versa) to provide whatever documentation they require. If you keep your own financial records (which many sole traders do), you may need to provide bank statements dating back for a certain period to show your income. If most of your income is cash and doesn’t show up in your bank statements, you will need to show other information to back up your income claims (such as tax return information).
Essentially, you need to show clear evidence of your income to the finance company if you want them to lend you the money. If you can’t show this, your application will be rejected. Finance companies are very cautious about getting caught up in money laundering and tax evasion activities, which are problems for the car industry, so they will always be suspicious of cash-based income declarations.
Copies of all your documentation, along with the signed vehicle contract and signed finance contract, are sent off to the finance company’s head office by the dealership (usually by fax). If everything is in order, the contract is activated and the finance company pays the dealership for your car. If there are any problems with your documentation, the finance company will usually request more information from the dealership and you (not uncommon), or reject the application outright despite originally accepting it (much less common, and usually as a result of something in your documents directly contradicting information provided in your original application).
A rejection from the finance company is usually pretty final, so it is important that you have the correct documents ready to present. Check out The Car Expert’s list of things to check before applying for car finance. Make sure you can verify any information you provide in your application with proper documentation. Providing information which you know to be untrue (even if it seems unimportant) is fraud, and any little white lie – usually it’s about how much money you claim to be earning – could see you end up in a lot of hot water. Even if you escape prosecution, you may be disqualified from getting finance again for a long time.