Subprime car finance

Having a low credit rating doesn’t rule out the option of getting car finance

BuyaCar team
Feb 16, 2017

There are a range of lenders who specialise in subprime car finance, allowing you to spread the cost of your car with monthly payments, even if you are young, have missed debt payments in the past, or have county court judgements (CCJs) registered against you.

Any of these factors can affect your credit score, which lenders use to estimate the likelihood of any borrower failing to pay back their debt. A low score is likely to mean that you’ll be charged a higher interest rate, increasing the cost of monthly payments for your vehicle, and that you may need a deposit.

There are some simple ways of increasing your credit score - if you haven’t already done so - which are listed below. You may also have the option of a guarantor loan, which can reduce your monthly costs if you have a friend or relative willing to agree to bail you out if you fail to make payments.

BuyaCar works with a panel of lenders, including subprime specialists. You can get in touch to discuss your options by sending us a message or calling 0800 050 2333 or apply for a quote now.

See the best used cars for under £100 a month


Subprime car finance for buyers with a poor credit rating

Even if you have a low credit score, you'll still have some flexibility in the type of finance that you're offered. Here are the most common options.
Subprime PCP finance (Personal Contract Purchase)

PCP agreements are the most popular type of car finance and generally available to subprime buyers. They offer relatively low monthly payments. At the end of the agreement, you have the option of handing the car back, trading it in for a different model or paying a lump sum to buy the car outright. For a full explanation, read our guide to PCP.

If you’ve got a low credit score, then you won’t be offered the interest rate that’s used in representative finance examples; the rate will be higher - considerably more in some cases - which will increase the cost of your monthly payments.

No-deposit PCP deals are not usually available for subprime buyers: you are likely to need to pay at least 10% of your car’s value at the beginning of the deal.



Subprime HP finance (Hire Purchase)

Hire Purchase is a simple type of finance that allows you to spread the cost of buying a car with a series of monthly payments. At the end of the agreement, you own the car. You can read our full guide to Hire Purchase for more information.

Just as with PCP, subprime buyers will pay higher interest rates than those with better credit ratings, which will increase the monthly cost of their car. A deposit of at least 10% is likely to be required too.


Subprime car leasing (also known as Subprime PCH - Personal Contract Hire)

Car leasing is a type of long-term car rental, but rarely offered to subprime buyers. It’s unlikely you will be eligible with a poor credit rating. Read our guide to PCH for more information.

Search for all new and used car deals


Affordable subprime finance

Making car finance affordable with a low credit score may mean that you’ll need to find a cheaper model that requires less of a deposit and lower monthly payments.

As with any type of finance, the overall cost of your car will be cheaper if you put down a larger deposit because you’ll be borrowing less money, and paying less interest on it. That’s particularly the case with subprime finance because the higher interest rates can account for a substantial proportion of your repayments.

Repayments on PCP finance are usually cheaper than on HP finance, but you won’t own your car at the end of it, unless you pay an additional lump sum - unlike HP.

One way of reducing the cost of your finance may be to recruit a guarantor.


Taking out subprime finance with a guarantor

Even if your credit rating is poor, you may still be able to access low-rate finance by using a guarantor.

These are usually friends or relatives who own a home and have a good credit rating. They must agree to make your payments if you fail to do so, which gives the lender additional security, and allows them to lower the interest rates offered, based on the guarantor’s credit score.

Keep in mind that the guarantor’s credit rating can be affected if payments are missed. For full details, see our guide to guarantor finance.


Boosting your credit rating

You may be able to boost your credit rating by taking some simple measures. If you are not registered on the electoral roll, then doing so is likely to increase your score.

And if you haven’t taken out any credit in the past, then lenders may mark you down, as you haven’t demonstrated the ability to make payments on time. Taking out a credit card and repaying every month should increase your rating. Other factors include having regular employment.


Why is subprime car finance more expensive?

Lenders believe that the lower your credit rating, the more likely you are to miss payments on your car, which could leave them out of pocket. As a result, they increase interest rates to account for this.

They also tend to require a sizeable deposit from the start. This helps to ensure that the amount that you owe to the lender is close to the value of the car throughout the agreement. If a buyer does miss payments, then the car can be seized and sold to pay off the debt.

Read more about:

Latest advice

  1. reviews

  2. 2018 Car scrappage deals

  3. BuyaCar deals

What our customers say