Top 5 Mistakes to Avoid When Applying for Car Finance

04 Mar 2025

Top 5 Mistakes to Avoid When Applying for Car Finance

Applying for car finance is exciting—you're one step closer to driving away in your next car. But before you dive in, it's important to avoid common pitfalls that could cost you money or even lead to a declined application. Here are the top five mistakes people make when applying for car finance and how to avoid them.

1. Not Checking Your Credit Score First

Your credit score plays a massive role in whether you’re approved for car finance and what interest rate you’ll get. Many people apply without checking their credit history, only to be surprised by a rejection or high APR.

How to avoid this: Before applying, check your credit score through free services like Experian, Equifax, or ClearScore. If your score isn’t great, take steps to improve it—such as paying off outstanding debts or making sure you're on the electoral roll. A little preparation can mean better finance deals.

2. Applying for Multiple Finance Deals at Once

It’s tempting to apply for several car finance deals to see what you’re eligible for, but doing this in a short period can hurt your credit score. Each hard credit check leaves a footprint, and too many can make lenders nervous.

How to avoid this: Use a soft search eligibility checker before committing to a full application. Many lenders offer this, allowing you to see your chances of approval without impacting your credit score.

3. Not Budgeting for the Full Cost of Car Finance

Car finance isn’t just about the monthly payments—it comes with additional costs like insurance, servicing, fuel, and potential balloon payments (for PCP agreements). Many people focus only on what they can afford per month, without considering the full financial picture.

How to avoid this: Use an online car finance calculator to work out your total costs. Factor in insurance, maintenance, road tax, and unexpected repairs. Planning ahead will help you avoid financial strain down the line.

4. Ignoring the Terms and Conditions

Car finance agreements come with terms that affect everything from mileage limits to penalties for missing payments. Skipping the fine print could mean unexpected costs or restrictions later.

How to avoid this: Always read the full contract before signing. If you’re unsure about something—like early repayment charges or end-of-agreement fees—ask the lender for clarification. It’s better to know upfront than be caught out later.

5. Choosing the Wrong Finance Option for Your Needs

There are different types of car finance, including Personal Contract Purchase (PCP), Hire Purchase (HP), and leasing. Picking the wrong one can leave you overpaying or locked into a deal that doesn’t suit your long-term plans.

How to avoid this: Consider how long you want to keep the car and whether you prefer owning it outright or having the flexibility to change vehicles. PCP is great if you like upgrading every few years, while HP is better if you want to own the car at the end. Take time to compare options before committing.

Final Thoughts

Car finance can be a fantastic way to get behind the wheel of your dream car, if you do it right. By avoiding these common mistakes, you’ll increase your chances of approval, secure better finance rates, and enjoy a stress-free journey to car ownership.

Ready to apply for car finance? Check your options today and find the best deal for your budget!

Editorial Disclaimer: Opinions expressed here are the author’s alone, and not those of any bank, credit card issuer or any other company. This article has not been reviewed, approved or otherwise endorsed by any of these organisations. NB: The information on this page does not constitute financial advice, please do your own research to ensure that the product / service is right for your individual circumstances.