Self-employed and cannot get car loan. How can I finance a new car?

planimals

I'm self-employed and make a fair income £26k/year.

My car is falling to bits and I've long passed the point where a replacement car would be cheaper to maintain. I'm not looking to spend much – no more than £4k. I found the perfect car for £3.5k. New clutch, belt, recently serviced, perfect history. The problem is, I would need to borrow £2.5k to finance it.

Despite an excellent credit score, a record of nearly two decades self-employment, same address for 15 years, I cannot get a loan. Computer says no every time. Immediately. As soon as I click the apply button, I'm told I cannot be offered a loan 'at this time'.

I need to replace my car. It's going to cost a fortune over the next 18 months. I know it will need at least three major repairs this year and that's without knowing what its annual service and MOT will reveal.

How do self-employed people buy cars these days? Do I need to approach a specialist lender? If so, who would you recommend? I thought Google might be able to help but the sites I'm directed to keep giving me the same answer: no loan for you.

marcia_

 Have you checked your credit records to see if there is anything untoward there?
On electoral role? No missed payments? Previous credit facilities being paid regularly? No unknown accounts? 

 I use ClearScore to keep an eye on my credit record 

vacheron

When is the annual service and MOT due? Is there no way you can save hard up until then and then jump when you find out the bad news? 

Re. not getting a loan of 2.5k, do you currently have a lot of other credit, or none at all, as both could damage your chances. 

Also, for this relatively small amount, you could consider applying for a money transfer credit card. There are a few around that offer 0% for 12 months for a 4% fee. This could work out considerably cheaper than a loan over 12 months... but would require a little more self discipline to pay off.

planimals

My current car will need its brakes serviced in the next couple of months. I've tried to get a credit card but it's a similar story. ClearScore says I owe BT money -- current bill -- I'll pay that and see what happens.

vacheron

planimals said:

My current car will need its brakes serviced in the next couple of months. I've tried to get a credit card but it's a similar story. ClearScore says I owe BT money -- current bill -- I'll pay that and see what happens.

Credit reports will usually only show missed payments once a series of payments have been missed, this could be anything from 2-6 months of missed payments. Is this showing as a missed payment or a default?

Are you sure that this is only in relation to your current bill? If you have a genuine missed payment marker, paying it off will not remove the marker, and it can remain on yout credit report for up to 6 years.

MEM62

planimals said:

How do self-employed people buy cars these days?

The probably save for them and pay cash - particularly if they are of a modest value such as you are proposing.  

mab3000

Not really sure the issue here is your self employment, especially if you’ve been self employed for a few decades. I can think of at least 4 car finance providers that I know for certain will accept self employed people, and it’s highly unlikely they are the only ones. 

Your excellent credit score is meaningless to the car finance or any other finance company. They don’t see your score, only details of your credit accounts (outstanding balances payment history etc). 

Have you tried a car finance  broker like Zuto or Carmoney? 

planimals

I've tried Zuto who declined me immediately but not Carmoney. I'll try them.

CliveOfIndia

planimals said:

My current car will need its brakes serviced in the next couple of months.

What do you mean by "serviced" ?  You don't really "service" brakes as such.  If it just wants new pads then that'll cost peanuts.  Even if it needs new discs as well, that won't break the bank (assuming we're talking about an ordinary run-of-the-mill car).  Hopefully you're using an independent mechanic and not paying main-dealer prices?

And do remember, brake discs & pads are consumable items, they'll need changing every so often even on a brand-new car.

planimals

This car has drums.

CliveOfIndia

OK, well in some respects they're even simpler than discs, mechanically-speaking.

It may be worth taking a step back and looking at this more pragmatically.  First, let's assume that you can't get a loan, for whatever reason that may be.  This means you need to make do with the car that you've got, at least in the short term.  It's an oft-quoted mantra, but in a large majority of cases it makes sense, from a purely financial point of view, to keep your current car going for as long as possible.  The cost of repairs is usually a lot less than the cost of buying a new car.

Yes, of course, there does come a time when a car has had it, but that's usually a lot further off than most people imagine.

planimals said:

I've long passed the point where a replacement car would be cheaper to maintain. I'm not looking to spend much – no more than £4k. I found the perfect car for £3.5k.

This is what you need to think about very carefully.  I'm assuming from the price, it's a fairly old car?  It's been looked after and got a decent service history?  That's great, and exactly what you should be looking for.  But it's still an old-ish car, and you've got to expect to have to do some repairs to it at some point.  Quite apart from the routine maintenance and consumables, which are an expected expense in any car, no matter what the age.

Don't get me wrong, that's the sort of price-range I usually look at when replacing a car, and you can get some bargains if you take your time and hunt around.  It helps if you're able to do routine maintenance and some of the simpler repairs yourself.

planimals said:

I need to replace my car. It's going to cost a fortune over the next 18 months. I know it will need at least three major repairs this year and that's without knowing what its annual service and MOT will reveal.

This is probably the clincher.  Are you sure it's going to cost a fortune?  What do you mean by "a fortune".  What repairs do you know are going to be needed?  Let's say, for the sake of argument, it needs £1000 spending on it.  If that means you end up with a half-decent car that's got another 3 or 4 years left in it, that's the sensible option to take overall.  In the meantime, you save up ready for when the inevitable happens.  If you can't afford to be putting away £100 each month into savings, you have to ask yourself how you would afford to pay off a loan, even if you were able to get one.

I hope none of this comes across as condescending, "preaching", whatever you want to call it.  Just trying to give an objective opinion from a purely practical/financial point of view.