Car Finance on Benefits: Everything You Need to Know

If you’re a driver who receives benefits, the prospect of successfully securing car finance can sometimes seem a daunting task. However, with the right information and approach, it's entirely possible to obtain car finance while on benefits.

For many individuals receiving benefits, having access to a reliable vehicle can prove vital for maintaining independence and pursuing new opportunities. To help guide you, we discuss the nuts and bolts of car finance for benefit recipients, so you can navigate the entire process with complete confidence.

Key Takeaways:

• Car finance is available for individuals on benefits, but there are various factors that will be taken into consideration first.
• Lenders will consider the type and stability of benefits when assessing applications.
• A stable income, good credit score, and meeting affordability criteria can improve approval chances.
• Various benefit types may be accepted, including Universal Credit and Disability Living Allowance (DLA).
• Working with a specialist broker like Octane Finance can increase your chances of approval.

Can You Get Car Finance on Benefits?

The good news is that it is absolutely possible to get car finance while receiving benefits. However, the approval process may be more challenging compared to those in employment who don’t receive benefits. 

Typically, lenders primarily focus on your ability to make regular repayments, regardless of the source of your income. While being on benefits doesn't automatically disqualify you, it's essential to understand that each lender has different criteria and risk assessments.

Can You Pay for Car Finance with Benefits?

In most cases, it is feasible to pay for car finance using benefits (either partly or fully). Lenders are primarily concerned with your ability to meet the monthly repayments - rather than where the money comes from. 

This means if your benefits provide a stable and sufficient income to cover the car finance payments along with your other living expenses, many lenders will happily consider your application. 

At this point, it’s really important for us to highlight that it's crucial to ensure taking on a car finance agreement won't negatively impact your financial stability in any way and that you can afford the repayments. 

What Type of Benefits Are Accepted for Car Finance?

If you’re applying for car finance, it’s good to know what types of benefits are considered by lenders - these include:

1. Universal Credit
2. Employment and Support Allowance (ESA)
3. Jobseeker's Allowance (JSA)
4. Disability Living Allowance (DLA)
5. Personal Independence Payment (PIP)
6. Child Benefit
7. Working Tax Credit
8. Pension Credit

How Does Car Finance on Benefits Work?

Similar to traditional car finance, car finance on benefits begins with a standard application process. Below we highlight what you can expect: 

Income Assessment:

Following your initial application, the lender will evaluate your benefits as a primary source of income. The type of benefits you receive can have an impact on a successful approval, as the criteria may vary between different lenders. 

Affordability Checks: 

As with all car finance applications, the lender will assess whether your benefits provide enough income to cover the repayments alongside your other financial commitments. The likelihood of being approved for car finance will depend on your total income.

Credit History: 

It’s important to understand your credit score and financial history will be considered during the process. As such, the higher your credit score, the more likely your chances of being approved for car finance. 

If you have a history of poor credit, then it’s worth bearing in mind that some lenders specialise in working with individuals with less-than-perfect credit. Our bad credit car finance page explains more about this process. 

Proof of Eligibility:

Unfortunately, lenders won’t be able to solely take your word for it that you’re on benefits. In order to process your application and give it serious consideration, they will need proof of your additional income. 

If you don’t have this to hand and require proof of a benefit claim, you can request this information from the GOV.UK website under the Department for Work and Pensions section.   

Guarantor Options: 

If you’ve previously been refused credit elsewhere, it may be possible to source a guarantor to support your car finance application. 

A guarantor is usually a close friend or family member who will vouch for you and be willing to make the monthly repayments on your behalf should you not be able to fulfil them. Our guide on what to do if you are refused car finance will talk you through the next steps. 

Higher Interest Rates: 

What isn’t always obvious when applying for car finance on benefits, is the available interest rate. It may be that you face higher interest rates compared to traditional employment-based finance due to being perceived by the lender as a higher-risk applicant.

How Can I Apply for Car Finance on Benefits?

Applying for car finance on benefits is fairly straightforward, but you must be prepared to answer all of the questions and provide all the documents required. 

It’s worth bearing in mind that failure to share any information asked for can result in a refused application. This could also affect your credit score and be logged in your credit history report.

To apply for car finance on benefits you should:

• Gather all the necessary documents, including proof of your identity, current address, and benefits received.
• Check your credit score so you can identify and approach suitable lenders.
• Calculate your budget to determine how much you can afford in monthly repayments.
• Research lenders and look for those who specialise in or are open to providing finance to benefit recipients.
• Consider using a specialist broker (like us here at Octane Finance) who can help match you with suitable lenders to increase your chances of being approved.
• Submit your application, ensuring you provide all the required information honestly and accurately.
• Wait for the decision from the lender to assess your application and confirm whether you’ve been successful or not. 

How Can I Boost My Chances of Getting Approved for Car Finance on Benefits?

A question we often get asked is how you can boost your chances of getting approved for car finance. If you receive benefits, then the first step is to ensure your income is stable as lenders prefer applicants with a consistent income history.

Improving your credit score is a big tick in the box where lenders are concerned. You can help do this by always paying your bills on time and addressing any existing issues on your credit report.

The chances of being approved for car finance are always greatly increased if you have a healthy deposit to put down first. This is because a larger deposit can reduce the loan amount you’ll need to borrow from the lender. 

Of course, be realistic about the vehicle you’re applying to purchase. Not only do you need to choose a car that’s suitable for your needs, but it’s equally important that you opt for a car and finance plan that's affordable.

If you’re unsure about your chances of approval, then consider a guarantor. A creditworthy guarantor can strengthen your application, but you must always check that the person you put forward for this role is aware of the situation and happy to help you. 

Always be transparent with the lender about your circumstances. If you receive benefits then let them know what type and proof of any additional income sources, such as part-time work.

Working with a broker specialising in car finance can significantly increase your chances of being approved for finance. This is because they work with lenders on a daily basis and can point you in the direction of finance providers who are more likely to approve your application. 

Frequently Asked Questions:

We hope our guide to car finance on benefits has proved to be a useful read. As an automotive broker working with leading vehicle finance lenders all over the UK, we naturally get asked many questions on the topic. Below, we answer some of the most popular:

Can you get car finance on Universal Credit?

Yes, it is absolutely possible to get car finance while receiving Universal Credit. As Universal Credit is a stable form of income, many lenders will consider it when assessing your application. However, you'll need to demonstrate that you can afford the monthly repayments alongside your other financial commitments.

Can I get car finance on benefits with no deposit?

While it's possible, no-deposit car finance on benefits can be challenging to obtain. Providing an upfront deposit improves your chances of approval and can result in better terms. Our guide on zero deposit car finance explains how it works. 

Can I get car finance on disability benefits?

Yes, the good news is that many lenders accept Disability Living Allowance (DLA) as a form of income for car finance applications. 

Can I get car finance with PIP?

As with disability benefits, Personal Independence Payment (PIP) is often considered as a valid form of income by car finance lenders.

Can I get guaranteed car finance on benefits?

Contrary to what you may have read elsewhere, there is no such thing as ‘guaranteed car finance’, as all applications are subject to assessment and review. However, there are ways to significantly improve your chances, such as working with a specialist lender who can guide you in the right direction. 

Can I get car finance if I'm unemployed?

It is possible, but challenging to get approved for car finance if you’re unemployed. Firstly, you'll need to demonstrate a stable income from benefits or other sources and may require a guarantor before being considered.

What do I need to provide for car finance on benefits?

Typically, you'll need to provide proof of identity, address, benefit statements, bank statements, and any additional income documentation.

Access Car Finance Deals on Benefits

At Octane Finance, we understand that it can prove challenging for benefit recipients seeking car finance. We are firm believers that everyone should be treated fairly, which is why we partner with an extensive panel of trusted lenders who specialise in providing car finance solutions for individuals on benefits.

As a leading automotive finance broker in the UK, our experienced team is dedicated to helping you find the most suitable car finance option, no matter what your circumstances are. We work with lenders who consider various types of benefits and can often secure competitive rates and terms, even for those with less-than-perfect credit.

Contact us today to explore your car finance options and take the first step towards your new vehicle.