We recently came across a question about taking car finance for a close friend. It’s got us thinking about the idea of doing this. Is a helping hand, or massive gamble?
"Is it possible to have more than one car finance agreement in my name? I have a PCP for my car and I want to start another one for my girlfriend's car as she can't get finance approved, but the dealer said I can't do that. If I can afford it, why not?"
This question is a not an uncommon one when it comes to people applying for car finance, and it causes considerable confusion.
If you're in the unfortunate position of owning a poor credit score or credit history and struggle to gain a car finance approval, it seems like the simple answer to this problem is to ask someone else to take the finance in their name, while you pay them for the monthly payments.
The Accommodation Loan
The problem with all this is that it's a complicated process and throws up plenty of red flags along the way. Taking out car finance for someone else is known as an Accommodation Deal or Accommodations Loan, despite the concept not actually being illegal, finance companies really don't like them. So what exactly is the problem?
If you are unable to obtain car finance, it's because the finance company has determined that you are too high a risk to loan money to. They simply do not believe that you can or will repay their loan.
It's simple really, they won't lend to you so they're not going to lend money to someone else who is applying on your behalf. You are trying to avoid your inability to get car finance by having someone else get it for you, and the finance companies are not stupid and see right through this.
When you break it down, it makes sense. The finance company does not expect you to be able to repay the loan, so they don't expect you to be able to repay the same amount of money to another person. The person responsible for repaying the loan does not have physical possession of the vehicle which leaves the finance company at greater risk of not getting its money back and not getting the car back.
If you are declined car finance, then the finance company will not approve a similar application from anyone at the same address, or anyone they suspect trying to obtain finance on your behalf as an accommodation deal. Your credit score will be marked accordingly, which means other finance companies will almost certainly reject your finance application as well.
Don't commit fraud so someone else can drive a new car!
Whilst the concept of an accommodation deal is not illegal, the concept of fraud most certainly is. Finance companies have become very sensitive to accommodation deal agreements in recent years, and they are on the lookout for any applications like this.
Usually as part of the terms and conditions of your finance contract, you will have to declare that you will be the registered owner and keeper of the vehicle, and that you are the main driver.
If you are applying for finance on behalf of someone else, and you do not intend to be the primary user of the vehicle, you will be lying to the finance company and that is considered fraud. In such circumstances, both persons involved would be committing fraud by attempting to cheat the finance company.
If someone asks you to apply for car finance on their behalf, the correct answer is NO. In addition to the legal issues surrounding an accommodation deal as outlined above, money issues tend to destroy friendships and relationships.
Disclaimer
Most car finance agreements in the UK are regulated by the Financial Conduct Authority, and anyone involved in the selling of car finance must be accredited by the FCA. You should always consider the terms and conditions of any agreement carefully before taking out any form of car finance, as you are making a substantial ongoing commitment and there may be significant costs if you change your mind or are unable to meet your commitments later.
Here at xlcrGroup we pride ourselves on being able to look after all financial circumstances and will explore all possible channels to secure our customers finance on a vehicle. Our customers' needs are number one on our priorities, we will do all we can to make sure our customers are left to drive away happy.
