When it comes to vehicle finance, taking out finance for someone else is called accommodation finance and even if you can afford it, it is forbidden - despite not actually being illegal.
Accommodation finance is where a person takes out finance on behalf of someone else. For example, this could include a parent taking out a new car finance deal on behalf of their son or daughter. Put simply, if the person applying for car finance is not the main driver of the vehicle, then this is accommodation finance.
This applies even in cases where the person actually paying for the finance deal can afford the repayments.
Even though it may seem that the finance companies are turning down an opportunity, in reality it is all to do with risk - just as we explained in our blog on The Importance of Credit Checks in Car Leasing. Looking at it from the finance companies' viewpoint, it all revolves around the credit score or credit history of the person who will be driving the car. Even though it may seem an easy option to ask someone else to take on the rentals and promising to pay them back, it is really not that simple.
In most cases, the person who would be taking on the responsibility for the rentals is either a close relative (such as a parent, grandparent, aunt or uncle, or even brother or sister), a partner or a close friend - but if the relationship with them breaks down for any reason, then they are still responsible for the rentals and have (usually) no legal recourse at all to get the car back.
As stated above, if the person actually responsible for paying the agreement does not drive the vehicle, there is a greater risk of the finance company not being able to get either the car OR their money back.
Taking into consideration the fact that the whole concept behind accommodation finance is not illegal, the number of applications to finance companies that fall under the 'accommodation umbrella' has increased in recent times, and the lenders are now very aware of the risks. They are now more vigilant when it comes to credit checks, even to the extent that if an application is received from the same address as someone who has been declined, then it may not be approved as it arouses suspicion that someone is trying to obtain finance on behalf of someone else.
If accommodation finance isn't illegal, what is illegal is not declaring that you are doing it. When it comes to the terms and conditions of a finance contract, there is usually a statement that the person taking on the finance is the main driver - and if you state that that is the case when it is not, that is fraud.
In this scenario, both persons involved (the one applying for the finance and the person they are applying for) could be charged with fraud in attempting to deceive the finance company. That could lead to a criminal record, and at the very least, a marker on their credit history that will affect future financial requests.
As every finance provider is different, it is worth checking the rules regarding accommodation finance before applying for vehicle finance as most will not allow any type of accommodation agreement. Others are a little more flexible, allowing it in certain circumstances such as below:
Once again, it is important that you check the rules regarding accommodation finance before applying for vehicle finance to ensure you are fully aware of the rules.
In certain situations, it may also be possible to apply for a joint application. This is dependent upon personal circumstances and the finance provider. To find out if a joint application is appropriate for you, call Nationwide Vehicle Contracts on 0345 811 9595 to discuss your options.