Bad Credit Car Loans

Can I get a car loan with bad credit?

It’s still possible to be approved for a car loan with bad credit. As car finance brokers, we work with multiple lenders who specialise in bad credit car finance and we know exactly what they’re looking for in an application.

We’ll use our expertise and experience of bad credit car finance in NZ to understand your situation and connect you with the right lenders.

Bad credit car loans are designed for individuals who have had issues with their credit file in the past. Lenders who offer these loans assess applications based on your ability to meet the repayments on a car loan now and in the future.

You can qualify for a bad credit car loan in NZ if you are:

• 18 years of age or older
• A New Zealand citizen or holding a work permit or permanent resident (PR)
• Currently employed or have regular income
• Holding a minimum of a New Zealand Restricted Licence
• If you were bankrupt or insolvent, you have been discharged for a minimum of 12 months.

What is a bad credit car loan?

A bad credit car loan – also known as second-chance car finance – is specifically designed to help people with a bad credit rating finance the purchase of a new or used vehicle.

Bad credit car loans typically come with a higher interest rate than regular loans, and may also include higher initial or monthly fees.

Bad credit car loan rate comparison

What’s the difference between a bad credit car loan and a standard car loan?

Other than higher interest rates, the main difference between a bad credit car loan and traditional car loans is that your loan may require a deposit, a vehicle to trade in or a guarantor to support your application.

This is because a poor credit history can make you a higher risk to lenders. With a standard car loan, applying with a deposit or guarantor could be a way to get a better interest rate. With a bad credit car loan, these extra steps may be required for loan security just to get the loan approved.

What are the interest rates on second-chance car finance?

Interest rates and loan establishment fees are higher on bad credit car loans. You can expect interest rates ranging between 16% p.a. and 29% p.a. Depending on the lender. Establishment fees also vary between lenders.

Bad credit car loan rate comparison

How can I get the best interest rate on my bad credit car loan?

The easiest way to reduce interest rates and get the best rate for your bad credit car loan is to pay off any defaults on your credit history in full. Clearing your original debts shows you are more likely to repay your new loan in full and on time.

If you have no defaults on your credit file within the past three to four years, you’ll be in an even better position. This illustrates to lenders that although you have encountered issues previously, you are now in a much better place to manage and repay any future loans.

Some other factors that can mean a better interest rate on a bad credit car loan include:

• Applying with a full and unrestricted driver licence
• Buying a new or newish car
• Contributing a deposit towards the cost of the car
• Buy an electric car as interest rates on EV loans are sometimes discounted

How much can I borrow with a bad credit car loan?

The minimum amount you can apply for through Vehicle Loans is NZ$5,000. This is the lowest amount you can borrow, regardless of good or bad credit. Generally, the most you will be able to borrow with a bad credit car loan is NZ$30,000.

How do I apply for a bad credit car loan?

If you want to apply for a second-chance car loan, Vehicle Loans can conduct a quick-and-easy No Credit Check Pre-Assessment. Simply call 0800 651 480 now and speak to one of our trusted vehicle finance brokers.

Our team can advise on your eligibility for a bad credit car loan without needing to submit to a credit check.

When applying for a bad credit car loan, you will need to supply documentation to prove your eligibility:

• Photo identification
• Proof of address
• Proof of income (payslips)
• Proof of expenses (bank statements)

The other crucial factor to consider for your application is whether you can make an initial deposit on your vehicle. Generally a deposit of 20% to reduce the level of risk for the lender is a great starting point.

How long does it take to approve a bad credit car loan?

Once we have all the required information we need from you, and our brokers are satisfied that you meet the criteria for a bad credit car loan, Vehicle Loans can typically have an approval completed within an hour.

Is a bad credit car loan the right option for me?

Vehicle Loans operates under the Credit Contracts and Consumer Finance Act (CCCFA) and all finance arrangements we provide are compliant with this Act and follow the guidelines under the Responsible Lending Code advised by the Ministry of Consumer Affairs.

Our brokers will only suggest a second-chance car loan if it’s a suitable option for your situation. As the borrower, you will need to ensure you are comfortable with the loan amount and your ability to meet your repayment obligations.

Bad credit car loan FAQ

I have a few defaults on my credit file, can I still get a bad credit car loan?

It’s still possible, depending on the type of defaults. When lenders are deciding whether or not to approve a bad credit car loan, they will look at the number and severity of the defaults on your credit file. For example, defaults on a mortgage or previous car loan (financial defaults) will be deemed higher risk than a small Afterpay purchase or unpaid telco default.

Current (unpaid) defaults will be more damaging to your application than defaults on your credit report that have since been repaid.

Lenders will also consider the value of each default, and total value of all defaults. Typically, we are able to gain approval for second-chance car loans with clients who have two or three defaults under NZ$3,000.

Can I get a bad credit car loan if I have been bankrupt or insolvent?

Yes, but your success will depend on your level of previous debt, and your current financial stability. We cannot get finance for individuals who are currently bankrupt or insolvent. You will need to have been discharged for a minimum of 12 months.

If you are currently finishing payment of a Summary Instalment Order (SIO) or in a No Asset Procedure (NAP), you may need to wait anywhere up to two years depending on the level of previous debt you have incurred.

Will a bad credit car loan damage my credit rating?

All credit applications can potentially lower your credit rating in the short term. If you’re already dealing with poor credit history, it’s important not to rush into applying for car finance with multiple lenders.

For example, John has three defaults on his credit file, but nothing new for the past three years. Although John has poor credit history, he has made attempts to repay his previous defaults and is now considering taking out a bad credit car loan to finance a new vehicle.

John applies online with a number of lenders to see if he’s eligible and what rates he’ll get. But without meaning to, John has consented to multiple credit checks on his credit file. This lowers his credit score and makes it much harder for him to get the finance he needs.

This is just part of the reason we offer a No Credit Check Pre-Assessment, to ensure anyone with bad credit can still get the advice they need without any risk to their credit score.

What kind of cars can I purchase with a bad credit car loan?

There are no restrictions on what kinds of cars you can buy with a bad credit car loan. There are even bad credit options for people looking to finance a boat or get a caravan loan. Once you have been approved for your loan, you can use the funds to purchase a new or used car through a dealer or a private sale (e.g.on TradeMe), or at auction.

The only potential limitation will be on the value of the car, as borrowing limits are lower on bad credit car loans. A lot of bad credit borrowers we work with contribute a deposit to increase their overall buying power so they can get the car they want.

What protection is available on a bad credit car loan through a broker?

When you apply for a bad credit car loan with a Vehicle Loans broker, we’ll offer additional protection for yourself and your vehicle, such as:

• Mechanical warranty with Mechanical Breakdown Insurance - Mechanical Breakdown Insurance covers the cost of repairing mechanical or electrical parts as a result of a sudden and unforeseen failure and breakdown that occurs during normal use in New Zealand.
• Guaranteed asset protection - Guaranteed Asset Protection Insurance protects you against losses that may occur when your vehicle is declared a total loss, and as a result the total loss settlement amount paid by your vehicle insurer is less than the outstanding amount you owe to your financier for your vehicle loan.
• Payment protection - Payment Protection Insurance protects your loan repayments if you suffer an insured event – such as redundancy, severe illness, or disability.

Even if you’re applying for second-chance car finance, it’s still worth considering extra protection, in case you experience any mechanical faults with the vehicle, or if you experience an accident or are made redundant.

Ask our brokers to discuss the most suitable options available to you.

Do I have to pay anything to apply for second-hand car finance?

There is no fee to apply for finance, even if you have bad credit.

Vehicle Loans is paid a commission or brokerage fee for processing the application and settlement of a car finance agreement. This is paid by the lenders.

Can you help me with a bad credit car loan in rural NZ?

Vehicle Loans serves clients all across New Zealand, not just in major cities like Auckland, Hamilton, Tauranga or Christchurch.

We can assist with bad credit car loan applications for people living anywhere from Whangarei to Invercargill, and best of all, you can easily apply online if you need to.

How do I apply for a bad credit car loan with Vehicle Loans?

If you need to apply for a bad credit car loan, you can contact our team over the phone or apply online.

If you’d like to speak to one of our team about your situation, you can call us free on 0800 651 480, and one of our experienced brokers will run through your application and finance solutions available to you.