Car Finance on Benefits

If your income comes mainly or partly from benefits, car finance can be harder to get, but some lenders will consider it. This guide gives an honest overview of how lenders look at benefit income, which benefits they may consider, the evidence they ask for, and the costs to think through before you apply.

Can you get car finance if you’re on benefits?

Some lenders will consider benefit income, especially when it’s long-term and regular. Others prefer income from work, or only consider benefits alongside earnings. Specialist lenders that work with people on lower incomes are more likely to consider benefits, though often at higher interest rates.

Whatever your income, lenders must check that you can afford the repayments. That means looking at what’s left after your essential spending, not only at how much you receive.

Which benefits might lenders accept?

There’s no fixed list, and each lender decides for itself. Benefits that lenders commonly consider include:

• Universal Credit, often alongside earnings
• Personal Independence Payment (PIP)
• Child Benefit
• Carer’s Allowance
• State Pension and Pension Credit
• Employment and Support Allowance and Disability Living Allowance

Benefits that are long-term and not tied to a short review period are generally seen as more stable. Ask a lender how it treats your specific benefits before applying.

What lenders need to see

• Benefit award letters, showing what you receive and for how long
• Recent bank statements, usually three months, showing income and spending
• Proof of identity and address
• Details of other income, such as part-time earnings
• A stable address history, ideally with you on the electoral roll

Costs and risks to watch for

• Higher interest rates. Lenders that consider benefit income often charge more. A few extra percentage points of APR can add hundreds or thousands of pounds over the term. See the cost examples in our bad credit car finance guide.
• The total amount payable. Look past the monthly payment to what you’ll repay overall.
• Running costs. Insurance, fuel, tax, MOT, servicing and repairs all come on top of the finance payment.
• Changes to your benefits. If your award changes or ends, you’ll still owe the payments.
• Claims that everyone is approved. Treat any company claiming approval is certain with caution. Lenders must check affordability, and a promise like that can be a sign of a poor deal or a scam.

Other ways to fund a car

• A credit union loan, with interest rates capped by law. Search on Find Your Credit Union.
• Saving for a cheaper car and buying it outright, avoiding interest.
• Guarantor finance, where someone else agrees to pay if you can’t. It may help your chances, but it puts your guarantor at real risk.
• The Motability Scheme, if you receive a qualifying mobility allowance, such as the enhanced rate of the PIP mobility component.

Car finance on benefits FAQs