Can pensioners get car finance?

Say goodbye to the daily commute and hello to the golden years; retirement marks the start of a whole new life chapter – and you might need a new set of wheels to make the most of it.
 
Whether you need a run-around to get from A to B or it’s time for you to finally treat yourself to that dream car you’ve had your eye on for years, you might be looking for car finance as you claim your pension.
 
But will you qualify for a loan now that you’re not working?
 
You might be surprised to learn that it’s not the 9 to 5 that counts, but the income that comes with being employed that lenders are interested in.
 
If you do have a source of income, whether that’s a pension or benefits, you might be eligible for car finance.
 
Read on to learn more about how getting finance for a car can work when you’re a pensioner.

Can pensioners get car finance?

Is age really just a number? If you’ve retired, you might be worried that it might prevent you from getting car finance.
 
The good news is that pensioners can successfully apply for car finance – but it’s not always the most simple route.
 
Your age isn’t usually the deciding factor, it’s your income that counts. Now that you’re no longer working, lenders might be concerned that you don’t have a regular source of income to help you make your car finance payments in full and on time each month. This uncertainty can make them more reluctant to approve your application.
 
But that doesn’t mean you’ll need to dust off that CV and get back to work to qualify for car finance; your state pension, private pension, and any benefits you claim can all count as sources of income.

What are the factors lenders check?

Every lender has different eligibility criteria – but they’ll all usually look at a range of fairly common factors before making a final decision.

Your chance of receiving an approval in principle will likely depend on:

Your income and affordability

Lenders want to feel reassured that you have enough regular income coming into your account to comfortably afford your monthly payments.

Your credit score and payment history

While it’s just a three-digit number, your credit score can give lenders a good idea of how you might act as a borrower. A good or excellent score can improve your eligibility while having a score that needs a little TLC could limit your options.  

Your age

Some lenders have upper age limits in place (usually 75 or 80) that might apply at the start of your agreement or when your loan agreement ends.

Your driving licence

While it is possible to get car finance with a provisional licence, many lenders ask that you have a full UK driving licence.

The car you want to buy

The age and value of your car can also affect your finance eligibility. Some lenders won’t offer loans for older vehicles and others may be more hesitant about offering finance for premium wheels that could put pressure on your budget.

Your ideal loan term

The loan term you choose will determine how much you pay each month and how much interest you’ll pay overall. If you have restricted affordability, you might qualify for finance if you choose a longer loan term length with lower repayments.

Can I get car finance with a poor credit history?

Your credit history gives lenders a fairly comprehensive picture of how you might act as a borrower. If you’ve missed payments in the past and now have a poor credit score, that can set alarm bells going for some lenders.
 
Life happens and nobody is perfect. There are a whole host of reasons why you might have struggled to make loan repayments, especially if you’ve gone through a period of unemployment, had an unexpected illness, or simply been hit hard by the cost-of-living crisis. Even so, if you’ve had payment problems in the past, lenders might be concerned it’ll happen again and be reluctant to take a chance.
 
Luckily, not all lenders feel that way. There are some that specialise in helping people with poor credit histories find a loan.
 
You might even be able to team up with someone else who does have a good credit score and apply for joint or guarantor car finance to improve your eligibility.

Can I use my pension or savings to pay off finance?

No matter whether you claim the state pension or have set money aside in a private fund, how you spend the money is completely up to you.
 
If you’ve managed to save a lump sum and want to pay off your finance early, you can request a settlement figure from the lender at any time. That’s the amount you’ll need to pay out to end your finance agreement early and become the car’s legal owner.
 
That being said, it’s always a good idea to keep some money in the bank as an emergency fund, just in case the boiler breaks down or you want to treat yourself to a week somewhere sunny (escaping the British winter absolutely counts as an emergency if you ask us!)

What alternatives are available to pensioners?

If you’d prefer to buy your new wheels outright, you could consider taking a lump sum from your pension.
 
At the time of writing, you can take up to 25% out of your private pension fund tax-free as soon as you turn 55.
 
Take that money down to your local dealership, sign all the paperwork, and your new pride and joy will officially be all yours.
 
If you have a long-term health condition or disability that impacts your mobility, you might also qualify for help from the Motability Scheme. Claimants of Personal Independence Payments (PIP) of Disability Living Allowance (DLA) can all be eligible.
 
With this scheme, your mobility allowance can be exchanged in return for a car lease and adaptations. It might not be completely free though; you might have to make an upfront payment depending on the vehicle you choose.