Applying for car finance can be an important step when you need a vehicle, but not every application is approved. If your car finance application has been declined, or you are wondering whether you are likely to qualify, it is worth understanding the factors lenders may consider.
A declined application does not necessarily mean you will never be able to get car finance. Your income, expenses, existing commitments, credit history and the details of the finance you are applying for can all be relevant.
Here are seven things to understand before making your next car finance application in New Zealand.
1. Your Income and Expenses Matter
When assessing a car finance application, affordability is an important consideration.
Lenders may look at your income alongside your regular living costs and existing financial commitments. This helps them assess whether the proposed repayments are manageable.
Before applying, take some time to work out your current budget.
Consider expenses such as:
- Rent or mortgage payments
- Groceries
- Power and household bills
- Existing loan repayments
- Insurance
- Transport costs
- Other regular commitments
It is useful to have a realistic picture of your finances before deciding how much you want to borrow.
If you are still working out your budget, you can use the GoWaka car finance calculator to compare potential repayment amounts.
2. Your Credit History Can Affect Your Application
Your credit history provides information about how you have managed credit in the past.
It can include things such as previous loans, repayments, missed payments and defaults. Lenders may use information from your credit report when assessing an application.
A credit score is only one part of the overall picture. Lenders can consider other information about your financial circumstances when deciding whether a particular loan is suitable and affordable.
If you are unsure what appears on your credit report, checking your credit information before applying can help you understand your current position.
3. Existing Debts Can Make a Difference
If you already have loans, credit cards or other financial commitments, these can affect your available budget.
For example, someone with several existing repayments may have less room in their budget for a new vehicle loan.
This does not automatically mean you cannot qualify for car finance. It means your existing commitments may be considered alongside your income and other expenses.
Before applying, make a list of your current debts and regular repayments. This gives you a clearer picture of how a new vehicle repayment could fit into your finances.
4. The Amount You Want to Borrow Matters
The vehicle you choose can have a direct effect on the amount you need to finance.
If you are looking at a more expensive vehicle, you may need to borrow more. A larger loan can mean higher regular repayments, depending on the interest rate and loan term.
This is why it can be helpful to work out your budget before choosing a vehicle.
If you already know roughly what you can comfortably afford, you can browse GoWaka’s vehicle listings and focus on vehicles that fit within your price range.
5. Your Loan Application Needs to Reflect Your Circumstances
Providing accurate and up-to-date information is important when applying for finance.
You may be asked for information relating to your income, expenses, employment and financial commitments.
Having your documents and information ready can make the application process more straightforward.
Depending on your circumstances, you may need information such as:
- Identification
- Proof of income
- Bank statements
- Employment details
- Details of existing financial commitments
- Information about the vehicle you want to purchase
Requirements can vary depending on the lender and your individual circumstances.
6. A Previous Decline Does Not Tell the Whole Story
If one application has been declined, it is important to understand why before making multiple new applications.
Consumer Protection NZ notes that lenders may consider factors such as missed payments, defaults, existing debt and recent credit applications when assessing credit risk.
Rather than immediately submitting another application, take some time to review your financial position and understand what may have affected the original decision.
If you were declined, you can ask the lender for the main reason for the decision.
If you are considering applying again, you can first read GoWaka’s guide on car finance pre-approval in NZ to understand how the pre-approval process works.
7. A Finance Approval Is Not the Same as a Suitable Loan
Getting approved is only one part of choosing vehicle finance.
Before signing a loan agreement, look at the complete cost of the finance, including:
- Interest rate
- Loan term
- Regular repayment
- Establishment or other fees
- Total amount payable
- Any additional products or charges
A lower regular repayment can sometimes result from choosing a longer loan term, so it is important to consider the overall cost rather than focusing only on the weekly figure.
You should also make sure you understand the loan agreement before signing.
If you are ready to explore your options, you can learn more about GoWaka car finance and the finance process.
What Can You Do Before Applying Again?
If your previous application was unsuccessful, start by reviewing your finances.
Check Your Credit Information
Look over your credit report for errors or information you do not recognise.
Review Your Budget
Work out your income, living costs and existing repayments. This can help you determine what level of vehicle finance may be realistic.
Consider the Vehicle Price
If the amount you need to borrow is higher than your budget allows, looking at a more affordable vehicle may help reduce the required finance amount.
Prepare Your Documents
Having your identification, income information and other required documents ready can make the application process easier.
Understand Your Finance Options
Different borrowers have different circumstances, so it is important to consider finance based on your individual situation rather than assuming that one option will suit everyone.
You can apply for car finance with GoWaka to discuss your vehicle finance requirements.
What About Bad Credit Car Finance?
Having a less-than-perfect credit history does not automatically tell you what finance options may be available.
However, borrowers with previous missed payments, defaults or other credit issues may face more difficulty accessing some forms of credit, and the terms offered can vary.
If you have concerns about your credit history, be open about your circumstances and make sure any proposed repayments are affordable for you.
The key is not simply finding a lender that says yes. You also need to understand the cost of the finance and whether the repayments fit comfortably within your budget.
Before You Apply for Car Finance in NZ
Use this quick checklist before submitting your application:
- Know your weekly or fortnightly budget
- Check your regular expenses
- Review your existing debts
- Check your credit information
- Know roughly how much you want to borrow
- Have your documents ready
- Compare the total cost of finance
- Make sure the repayments are affordable for your circumstances
Taking these steps can help you approach your car finance application with a clearer understanding of your financial position.
Final Thoughts
Being declined for car finance can be frustrating, but it is useful to understand the factors that may have affected an application before trying again.
Your income, expenses, existing commitments, credit history, requested loan amount and the suitability of the finance can all form part of the assessment.
If you are looking for car finance in New Zealand, contact the GoWaka Car Finance team to discuss your vehicle finance needs and find out what finance options may be available for your circumstances.
