Getting car finance when unemployed 

If you’re out of work, having a car can be a vital part of getting back out there and securing a role. Being unemployed can make it hard to purchase a car outright, so car finance can be a useful way to spread the cost into more manageable chunks.

You can still be approved for car finance if you’re currently unemployed, but it can be more difficult.

Unemployed car finance

If you have a good employment record but are currently between jobs, you could still be eligible for car finance. You might also be approved if you receive benefits, and being retired with a pension is usually fine as well.

You’ll have to assess your circumstances and see what works best for you, but unemployment doesn’t automatically mean you’ll be refused finance.

Can I get car finance if I’m unemployed?

You might still be able to get car finance if you’re currently unemployed, but it will usually be much harder.

It’s sometimes recommended that you don’t spend more than 10% of your monthly income on car finance, so it’s worth taking a look at your finances and seeing what you can afford. If your income comes from benefits, you might still be approved for a loan if you work out a budget that suits your circumstances.

How do I get a car loan if I’m unemployed?

Have a good credit score

If you’re unemployed and want to apply for car finance, it’s a good idea to take a look at your credit report and make sure it's in tip-top shape. Having a good credit score will improve your chances of being approved for finance, as this will show a history of being a good payee.

Only apply for what you can afford

You should pair a good credit score with a loan application that fits your budget. Take a look at your finances and see what you can realistically afford – car finance companies will only approve you for a loan that they know you can pay for.

Use a guarantor

You can apply for car finance with a guarantor if you don’t have the best credit history, but it will be up to the finance company to decide whether you’re eligible.

Guarantor car finance isn't that common in recent years, so you’ll need to do your research to find a lender that offers this.

Your guarantor should be a close friend or family member – you want this to be somebody you trust and who understands the associated risks, and would be happy to pay the loan if you were unable to.

Find out more about applying for car finance with a guarantor here.

Pay a larger deposit

If you’re able to, paying a larger deposit is a good way to give the finance company some extra security. If you owe less money overall, it might feel more comfortable offering you the loan. This could be a good way to get a new car if you can’t quite afford the whole thing, but have a good percentage of the cost already saved up.

Can I get car finance if I receive benefits?

If you currently receive benefits, you can still apply for car finance. As long as you apply for a reasonable amount of finance that fits your budget and can prove that you have the income to cover the payments, you could still be approved for the loan.

It’s a good idea to check your credit report before applying for car finance, as a high credit score will improve your chances of being accepted.

Can I get car finance if I’m retired?

If you’re retired, the likelihood is that you receive a regular pension. If this is the case then you can still be approved for car finance, especially if you have a good credit score.

As long as you can prove that you can afford the finance payments and you have a good credit history, you could still be approved for car finance.

What types of car finance can I get if I’m unemployed?

The most popular types of car finance are Personal Contract Purchase (PCP) and Hire Purchase (HP), but you might also choose to use a personal loan to pay for your car instead. You may still qualify for a personal loan if you’re out of work, but you’ll need to prove you have another source of income and a good credit history.

Personal Contract Purchase (PCP) car finance

Personal Contract Purchase (PCP) is a type of car finance that considers the depreciation of your car over the length of your contract. At the end of your contract, you can decide whether to pay the lump sum ‘balloon payment’ and purchase the vehicle outright, or hand it back and get something new.

Because you’re not paying for the car’s full value, PCP payments are usually cheaper. Pair this with a large deposit, and you could get your PCP payments to a manageable point.

There’s no guarantee that you’ll get approved for PCP car finance if you’re not getting a regular income, but the lender will be able to give you a better idea.

Hire Purchase (HP car finance)

Hire Purchase (HP) car finance will see you pay the full value of your car across monthly payments until you’re all paid up and become the full owner of the car. There will usually be an ‘option to purchase’ fee included as part of the final payment on your HP deal, but this will be much smaller than the final payment for PCP finance.

HP monthly payments will usually be higher than the payments on a PCP contract, as you’re paying for the full value of the car and will automatically own it when you’re all paid up.

There’s also no guarantee you’ll be approved for HP car finance, but a good credit score, consistent employment history, and a large deposit could increase your chances.

Car finance when unemployed

If you’re between jobs and want to apply for car finance, there is still a chance you might be approved. You should take the time to check your credit history and make sure it’s looking positive, have a good record of previous employment, and maybe even consider putting down a larger deposit.

You’ll likely find it harder to get approved for car finance if you can’t prove that you have a way of keeping up with payments, so you might need to consider alternative ways to finance your car.

Learn more about car finance:

• What happens if your finance car is written off?

• What checks are done for car finance?