18 year old nephew can’t get car finance

Standingstrong

Hello my 18 year old nephew can’t get car finance they keep declining him.. he’s turned 18 3-4 weeks ago now , he’s applied to be on the electrical roll. He earns £1566 a month which is quite good for a 18 year old. 

Why do they keep declining ! 

cymruchris

Standingstrong said:

Hello my 18 year old nephew can’t get car finance they keep declining him.. he’s turned 18 3-4 weeks ago now , he’s applied to be on the electrical roll. He earns £1566 a month which is quite good for a 18 year old. 

Why do they keep declining ! 

Possibly as he has no history yet. He may have applied to go on the electoral roll - but is he actually on it yet? Does he have any accounts listed on his credit reference agency reports? You haven't said how much credit he's trying to get - or through what channels - but it's likely that while he's only just gone 18, with no electoral roll entry and very limited history that many mainstream providers will say no. Those that do say yes will likely be high interest or linked to a silly priced car that can be gotten far less for cash.

If they are earning 1566 a month - would it not be better to scrape together enough for a banger - and keep on saving for a better car in a year's time? Rather than paying extortionate interest on a depreciating asset?

CKhalvashi

At this age he will have absolutely no credit history, so they do not know how he will handle his payments.

The advice given on the forums has typically been to apply for a very low limit credit card (Capital One, Aqua, Vanquis etc), spend a small amount on the card and pay in full every month, at which point he will have a history of regular payments within a year.

As this is MSE, does he really need a financed car? Finance on a depreciating asset is in many cases not a good use of money. I'd advise checking out Bangernomics etc for a first car as statistically he is going to damage it over the next few years anyway. Something old, cheap and generally self-repairable is also going to teach him basics about maintenance, which is valuable in itself. At worst case, such cars should be close to cost neutral also in depreciation, making far more financial sense.

Grumpelstiltskin

As well as paying for a car has he factored in the cost of insuring it?

Unfortunately with a banger it could easily cost him more than the cost of the car to insure it.

fatbelly

Multiple applications in the 3-4 weeks since his 18th birthday will not look good either.

Tell him to take a step back and do things in order.

Get on electoral roll

Get current account in credit

Credit card (prob sub-prime) that he pays off in full each month - he can do soft searches to check who might give him one

Check credit file to confirm all this is showing

Save regularly into savings account

Edi81

He should be on the electoral register already as you put on 16 and 17 year olds. 

He needs to stop apply for credit for a few months probably 6. 

With the cost of insurance he should just save up - shouldn’t take long on that pay even after paying his parents for board. 

MrFrugalFever

Unfortunately just because he is now of a legal age to obtain credit doesn’t mean he will.
Firstly, I would question how much he is looking to spend and if anything can be bought cheaper (statistically accidents are far likely to happen the firs5 few years of passing test), something he isn’t going to be too precious about if he bumps and scrapes it (we’ve all done it!).

He will need to check his credit reports and understand what has been reported so far - put yourself in the lenders shoes, he has no history of borrowing and paying back so what would you lend him?

Lenders often require at least 3 years employment history/address history to make an informed decision, unlikely that he can provide this.

If borrowing is absolutely required, I would start with the bank in which holds his current account that his wages get paid in to.

in any case, don’t be tempted to finance the car on his behalf (or any other family member), it is classed as an accommodation deal / fronting and falls under the Theft Act as it is misleading by deception.

macman

You've given no indication of the amount of finance he is applying for, or at what rate? Are you really confident he can service this debt on £18k pa (presumably that's a gross income)?
There is no automatic right to be granted credit the moment you reach 18. Absence from the electoral roll will be a major negative.