What Checks Are Done for Car Finance Approval?

Cutting through the car finance checks

Car finance approval in the UK is more structured than many expect. Most reputable, FCA-regulated brokers start with a soft search to understand your profile without leaving a footprint that affects your score. A full hard credit check typically happens only once you have chosen a specific deal and you are ready to proceed. This approach keeps your credit file tidy, avoids a cluster of hard searches, and improves your chances of approval by matching you to a lender that actually suits your circumstances.

There is also an important backdrop for trust. Motor finance complaints related to historic undisclosed commissions have been paused and are scheduled to resume at the end of May 2026, with a redress scheme expected to compensate eligible customers from agreements taken between 2007 and 2024. For current applicants, this translates into tighter transparency and clearer commission disclosure. You should expect to see how your broker is paid and the rationale for any recommended lender.

Affordability now leads the conversation. Lenders look beyond your score to whether the monthly payment genuinely fits your income and outgoings. As risk models evolve and price sensitivity rises, lenders increasingly use tiered rates and granular affordability checks. If you are planning a mortgage, timing matters - new car finance within six months of a home application can weigh against you, as many lenders want six clean bank statements and payments below sensible income thresholds. Real cases show approvals turning around when applicants reduce monthly car costs or choose shorter terms.

The upshot is simple: shop smart, avoid unnecessary applications, and work with a broker who uses soft searches first, then submits a single, well-targeted application. You gain access to a wider panel, including specialist lenders if your bank has declined you, and you keep your credit profile intact for other goals.

Understanding APR is not just percentages - it is what you pay in real terms.

Who is this for?

This guide is for UK drivers comparing PCP, HP, lease, or personal loan options and who want to understand exactly how approval checks work. It also helps recent bank declines, self-employed applicants, and those rebuilding credit who need a smarter route that limits hard searches. If you are planning a mortgage within the next year, you will find clear pointers on timing and affordability so your car purchase does not reduce your borrowing power. And if you have had motor finance in the past, you will learn how the 2026 redress landscape affects trust and transparency today.

Finance routes at a glance

1. Personal Contract Purchase (PCP) - lower monthly payments with a final balloon.

2. Hire Purchase (HP) - spread the cost to own the car at term end.

3. Personal Contract Hire (Lease) - fixed-term use, hand back at expiry.

4. Personal Loan - unsecured loan, buy car outright from day one.

5. Broker-assisted finance - tailored match to lenders with soft search first.

Costs, impact and risk trade-offs

Can you get approved? What lenders look for

Approval is built on affordability, stability, and responsible use of credit. Lenders assess income against committed and essential spending to judge if the monthly repayment fits comfortably. As a guide, many underwriters get uneasy when car costs start to push above a sensible share of your monthly income, particularly if you also carry credit cards or loans. They will want to see consistent bank statements over at least three to six months, steady employment or verifiable self-employed income, and a credit file that shows you meet existing obligations on time.

A broker can help shape an application so it lands with the right lender at the right price. Kandoo’s approach mirrors best practice in the UK market - run an initial soft search to size up eligibility, then present a single, suitable application once you are happy with the terms. That avoids duplicate hard searches from trying multiple lenders directly. If a mainstream bank has declined you, a broker can access specialist lenders who are comfortable with non-standard cases, provided the numbers add up and the vehicle aligns with policy.

From enquiry to keys - the process

1. Share your details and budget for a soft eligibility check.

2. Review tailored options, rates, and projected monthly payments.

3. Select a preferred lender and deal that fits affordability.

4. Provide documents - ID, proofs, income, and bank statements.

5. Lender runs a single hard check and completes underwriting.

6. Sign your agreement digitally after final approval and terms.

7. Funds are released and your car is collected or delivered.

Upsides and watchpoints

Before you hit apply

A little preparation goes a long way. Start by tidying your bank statements for the next three to six months - fewer unplanned payments and no late fees send the right signals. If a mortgage is on the horizon, avoid taking new car finance within six months of your home application. If you must change vehicles, consider a short lease or a lower payment to keep total monthly outgoings within a sensible band, ideally below the sort of thresholds lenders watch. Where payments look high, shorter terms or refinancing to reduce the monthly figure can turn a decline into an approval elsewhere. Above all, resist scattergun applications. Use a broker route that begins with a soft search, lines up a deal you can genuinely afford, and submits one clean application when you are ready.

Alternative ways to drive

1. Buy with cash after pre-saving or selling your current car.

2. Salary sacrifice for an electric car if your employer offers it.

3. Short-term lease or subscription while you prepare mortgage statements.

4. Refinance an existing agreement to lower monthly payments.

5. Car share or rent occasionally if annual mileage is low.

Your questions answered

Q: Will applying hurt my credit score? A: A soft search will not affect your score. The hard check happens only when you choose a deal and proceed. Using a broker helps avoid multiple hard footprints.

Q: What about the FCA redress on historic commission? A: Complaints handling is paused until the end of May 2026 while a compensation scheme is finalised. If you had finance between 2007 and 2024, you may be eligible for redress once the scheme opens.

Q: How important is affordability versus my credit score? A: Both matter, but affordability is decisive. Lenders weigh your income, regular bills, and existing debts to ensure the monthly payment comfortably fits your budget today and over the term.

Q: I was declined by my bank - do I have options? A: Yes. Brokers access specialist lenders that consider complex cases, different employment types, and varied credit histories. A well-packaged single application can secure approval at a fair rate.

Q: How close to a mortgage can I take car finance? A: Ideally more than 12 months before. Avoid within six months of a mortgage application, as lenders usually want clean statements and stable outgoings.

Q: What documents will I need? A: Typically photo ID, proof of address, income evidence such as payslips or SA302s, and recent bank statements. Vehicle details are needed once a deal is chosen.

Q: Are electric vehicles assessed differently in 2026? A: Underwriters focus on affordability first, but evolving EV pricing and tax can shift monthly costs. Expect careful scrutiny of total cost of ownership and realistic mileage.

Why choose Kandoo

Kandoo is a UK-based retail finance broker that keeps your credit profile front and centre. We start with a soft search, match you to suitable lenders, and submit one targeted application once you are ready. No upfront fees - our commission comes from the lender - and you get clear, transparent terms that prioritise affordability and long-term value.

Important information

This content is general information, not personal advice. Finance is subject to status, affordability, and lender criteria. Terms and APRs vary. Consider independent advice if unsure. Past performance or case examples are not guarantees of future outcomes.