Car Finance Tips
We want to help you get that car of your dreams. We would also like to make the process go as quickly and as smoothly as possible! So, we have created a few tips and pointers you can get ready before applying for car finance to give you a much higher chance of getting finance approved.
Being Prepared
The finance companies generally like to see your salary being paid directly into your current account. It always helps to have your bank statements or payslips available to be submitted to the finance company to support the application. For stronger applicants who have a previous credit history and who have kept their previous agreements or mortgage up to date, have between 10% and 30% equity (trade in or deposit) and a good full-time job, we can submit finance applications directly to them. Finance companies operate Credit Scoring systems which use a mixture of the above factors to decide whether to grant the approval or not.
Having said this, it generally makes the process quicker if you have statements and payslips available to send them in. With the statements, it’s very important that we have a full 3 months statement and that they are as recent as possible, for example when this blog post is up it’s the first week in August so we would need the bank statements going up to at least the end of June to be valid, preferably for July. If you get signed up to eStatements the process of getting your latest statements online is usually a lot easier and quicker to do. You can order eStatements and they will be available a lot quicker than paper statements.
If you cannot, however, get statements up to within a few weeks of the application date then what you can do is download your recent transaction history, as long as this transaction history overlaps with your statements. The overlapping is important so that the lenders can clearly see that it is from the same account as the transaction history will not have your name or account number on it.
Strong Bank Statements
The banks want to see the customers’ ability to repay the loan or in bank lingo “Repayment Capacity”. This means that if your car repayment is say €250 per month, you should have at least this amount in surplus in your bank account or an overdraft facility in place to cover this. In addition, the lenders don’t like to see any referral fees, returned cheques or unpaid fees. the max you can have over the 3 months is 2 on your statements. If you have any at all, perhaps you could wait a few weeks until they will not appear on your 3 months statements.
What we mean by referral fees are when your bank account either hits a nil balance or hits the overdraft limit or a cheque is presented with insufficient funds, the bank charges you a referral fee, unpaid the cheque or direct debit. This shows that you have insufficient funds in your account to meet your financial commitments.
If you are thinking about applying for finance and you have insufficient funds in your bank account or have experienced several referral charges or unpaid fees, it may be worth strengthening your bank account prior to applying. This would mean leaving as much surplus in the bank as possible for a few months in order to increase your chances of success and presenting your financial situation as strong as possible.
Poor Credit History
If you have a poor credit history on the Irish Credit Bureau or have defaulted on a mortgage or loan in the past 5 years, this will show up when the finance company runs a credit check. For most mainstream lenders, a poor ICB will generally be automatically declined.
There are some lenders in the Irish market who take poor ICB’s into consideration when underwriting a finance proposal. They charge a higher interest rate but will generally deal with those who have poor credit and who have been in a structuring agreement for at least 6 months. They will also need to see the customers’ ability to repay based on their current income and monthly expenditure.
You can obtain a copy of your own ICB credit report from http://www.icb.ie/ for a small €6 fee.
If You Are Self Employed
Self-employed customers generally need to provide proof of income from their business bank statements. This can also be supported through your self-assessment tax returns or from your last set of financial accounts. Both can usually be provided by your accountant. A tax clearance confirmation from your accountant or the Revenue may also be required.
Business customers who are Vat registered who purchase commercial Vat qualifying vehicles can also claim back the Vat. This is can be done either by way of a Hire Purchase agreement or Lease agreement. With HP, the customer pays the Vat upfront and claims it back at their next Vat return. With Leasing, the Vat is charged on each repayment and the customer can claim it back as they make each payment. Any queries in relation to the customers tax status or whether to go lease of HP should be dealt with by the customers accountant or tax adviser.
If you would like to discuss any of these tips, you can contact the Vendor Finance car finance team on 071 931 0137 or see further information on www.vendorfinance.ie
