Car finance for part-time workers

Getting a loan when working part-time can be a worry, but it needn’t be – here’s the lowdown on car finance for part-time workers

Matt Rigby
Apr 30, 2022

It is likely that, as a part-time worker, you may well worry that getting approved for car finance will be more tricky than for someone with a full-time job. Fortunately, the number of hours you work doesn’t matter to a lender. Instead, it's the overall amount of money you earn that is important, as is proof of a regular income. So, provided you are looking at deals that are comfortably affordable for you, there’s a good chance you could get approved for car finance.

Remember, too, that under the terms of employment law, most part-time workers enjoy the same rights as people in full-time work. So, apart from earning less money when doing comparable jobs - as you work fewer hours per week - you should be treated identically and should be able to have a similar amount of confidence when applying for finance - provided you earn enough to fund the car you're after.

In short, the terms part-time and full-time are just labels. Instead, it’s the amount of money you earn every month that matters more to a lender. If you can afford monthly payments on a car, there's a good chance you'll be able to finance one - regardless of how many hours you work each week.

No matter what your current position, it may be possible to secure yourself a car finance deal if you don't have the cash to spare. Click on the link below that best reflects your situation to find out more or keep reading for more information on part-time car finance:

Part-time car finance: who works part-time?

People work part-time for a range of reasons. Your financial situation may be such that you choose to work fewer hours. You may require time to care for a relative. You may like the freedom and flexibility of having multiple jobs. Or it could be that you haven't managed to secure a full-time job.

Meanwhile, many part-time workers are students - who can only spare certain hours to work - in which case other factors such as age may also need to be considered when applying for a loan. Your income may be high enough to afford the car, but aspects such as your age may prevent you from getting finance.

Whatever your reason for working part-time, you shouldn’t believe the door to a car loan is closed to you. Instead, remember that lenders take into account a range of criteria beyond simply your income and hours of work. Making sure these other factors are in good shape will, as a part-time worker, help your chances of securing the car you want for a monthly payment you can afford.

Car finance: check your credit status

We all have a credit history, which is recorded by the three major credit reference agencies. The information they hold on us includes current and past loans, our repayment records, county court judgements (CCJs) against us and whether we’re on the electoral roll. This helps them to determine our credit rating.

Lenders use their own version of this score, in combination with other pieces of information including our age, employment status, income, and expenses information that we provide, to assess whether we qualify for a loan and, if we do, what interest rate they will offer us.

Borrowers have a right to see their credit history and, where they believe there are errors or information is out of date, to suggest corrections. You can check your file via Moneysupermarket’s Credit Monitor or Money Saving Expert’s Credit Club. If you see any errors, notify the relevant reference agency which, if it agrees, must amend your file.

Check your finances to ensure you can afford a loan

Getting your income and expenditure in check is a key way to start any loan application process. When gauging what you can afford to pay back, lenders typically set around 25% of a person’s take-home income as the limit for monthly payments. The rest of your income they consider to be for your living expenses.

So, if monthly payments for the car you want come under that level, you should have a good chance of being approved. However, if they come in at over that, you may need to find a cheaper car, put down a larger deposit, or go for a longer contract to get monthly payments down to an affordable level.

To discover how much spare cash you have available to finance a loan, refer to your latest bank statement and create a list of your typical monthly outgoings. It’s likely to include mortgage or rent, insurance costs, energy bills, clothing, food and entertainment.

Crucially, don't forget to include the main costs (including insurance, maintenance and fuel) of running a new car, since the lender will want to see that you have taken these into account, too.

The point is, a lender needs to be sure you can afford the loan you’re applying for - and you need to know, too.

Get your finances straight

Checking your finances will have given you the opportunity to see if there are any existing loans you can settle, or subscriptions, insurances or other contracts you can cancel to free up cash every month - assuming they don't come with heavy early termination penalties.

Cutting these regular costs should free up more borrowing capacity, although it is vital you channel some of this towards your living expenses, as well as a surplus for emergencies.

Car finance: be realistic about your part-time income

As we said earlier, lenders are more interested in your income than the hours you work. That’s your current income, by the way. Any additional money you claim you can earn in the future by virtue of going full-time - for instance if you're coming to the end of a university course - is irrelevant to them, as they need proof of your income to date.

Lenders will focus only on your current employment situation and will want to see recent payslips to establish your typical income. This focus on your present situation means that, for example, someone working 10 hours per week at present but who claims they will be working 30 hours every week from next month, will be considered for a loan based only on their current 10 hours of weekly work.

If you're looking to borrow a larger amount, therefore, it's wise to wait until you've started working longer hours and have evidence, so you have a greater likelihood of being approved for the amount you're after.

Your employment record

Despite having equal status under the law, part-time workers may be regarded by lenders as being in less secure employment or in receipt of fewer workplace benefits than their full-time colleagues.

For this reason, it will help your application if you can demonstrate a reasonably long and settled employment record, just as a full-time applicant must, and be able to show clear knowledge of the terms of your employment contract.

Guarantor car finance for part-time workers

Another option is guarantor car finance. A guarantor is someone who guarantees your loan will be repaid, by stepping in to continue making repayments on your behalf should you be unable to. They can help ease your path to that car loan you want. However, to be considered as a guarantor by a lender, they need to have a good credit rating.

A family member is the most likely guarantor; someone who trusts you to take out a loan in good faith and who the lender believes can be relied upon to abide by their responsibility to make payments if you can't. It’s important to know that the guarantor’s role is not to top up your repayment money but to improve your creditworthiness - so they need to have a strong credit score.

Only your income, and not yours plus theirs combined, will be taken into account by the lender, and repayments will remain your responsibility until - should you be unable to make them - they become the responsibility of the guarantor.

This person should understand that if they fail to make the repayments they, as well as you, will be pursued for any monies owed, through the courts, if necessary, and their credit rating will suffer as a consequence.

Your car finance options

If you want the best car for the lowest monthly payments, you may want to consider a type of finance called Personal Contract Purchase (PCP). With this option, your monthly payments only cover a portion of the car’s price, meaning you could get a better car for your monthly budget. You simply pay a deposit, followed by a series of payments - which work out smaller than they would be with an equivalent loan.

In contrast to a typical loan, you don't own the car at the end of the contract, however. If you want to buy it, you then make what's called the optional final payment. But, if you want to change into another car at this stage, or walk away with nothing left to pay, you can simply hand the keys back - provided the car is in good condition and you've stuck to the pre-agreed mileage allowance.

Other forms of finance include Hire Purchase - where you put down a deposit, followed by a series of monthly payments and automatically own the car at the end of the contract - but because monthly payments cover the whole cost of the car here they work out higher, so you would have to get an older or cheaper car for the same monthly payment compared with PCP. However, you would own the car at the end of the contract with no large final payment left, as would be the case with PCP.

Just Add Fuel

Peugeot and Citroen are among the car makers offering what's known as Just Add Fuel. This type of deal is based on a PCP finance setup, the difference being that all your motoring expenses including insurance and servicing, are bundled into the deal. The only extra you have to pay for is the fuel you use.

That means that at first glance this works out more expensive than a traditional PCP - but you get other running costs thrown in to offset this. Furthermore, Just Add Fuel offers help you to work out exactly what your car is going to cost you each month, which makes budgeting easier. Other manufacturers, like Volvo and Volkswagen, have started to offer similar schemes, too. Read more about them here.


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