It’s not uncommon for people to apply for finance on behalf of someone else. Perhaps you’re a parent helping a child get their first car? Or maybe your partner or close family member is struggling to get finance?
While you’re not breaking any laws if you’re trying to work out how to put a car loan in someone else’s name, you’re almost certainly breaking the terms and conditions set out by your finance company – and the situation could get worse.
Here, we’ll look at why putting car finance in someone else’s name is a problem – and some of the issues you might run into if you try to do it.
Finance companies have a term that’s used when someone tries to finance a car that’s actually going to be used primarily by someone else; it’s called ‘accommodation finance’ and, quite simply, they don’t like it.
So, what’s the problem?
Surely as long as you can afford the payments, then everyone’s happy – even if you’re paying a friend or parent to pay it for you?
Well, it’s not quite that straightforward. Finance companies work with ‘risk’ at the heart of everything they do. When you apply for a car loan of any kind, they’ll consider a huge number of factors, including:
- Your personal details
- Your job or employment status
- Your living arrangements
- Your credit history
- Your financial incomings and outgoings
A team of ‘underwriters’ look at all this information before deciding whether or not to approve the loan – as well as that interest rate that the money will be offered at. If they consider you a high risk, they may either charge a higher interest rate – or refuse the loan.
Generally, when someone applies for finance using someone else’s name, they’re hoping that the other person’s credit rating or financial status will mean they get approval – or a better deal. The thing is, the car and the finance package isn’t really for the applicant – it’s for the person who’s going to be driving the car.
Effectively, you’re side-stepping all the measures the finance company puts in place to make sure they’re lending money with an appropriate level of risk. They’re basing their lending on the applicant’s details – but it’s you that’ll be driving and paying.
Running into problems
If you do manage to sneak an accommodation deal past a finance company, there are a series of problems that can occur when you’ve got your car.
Usually, the person you’re applying on behalf of is a friend, relative, or someone you’re in a relationship with. So, what happens if the relationship or friendship breaks down? They might stop paying the finance – and you could lose the car, or they might simply be trapped with a large debt that’s not theirs.
Sometimes, if repossession of the car is needed, a finance company won’t be able to track it down – leaving them with no leverage to get the money back from the person who’s applied.
All of these things significantly increase the risk for a finance company – and finance companies don’t like unnecessary risk.
Is it fraud?
We’ve already mentioned that an accommodation finance deal doesn’t actually break the law – but in actual fact, there are cases where financing a car in someone else’s name can become fraudulent.
When you apply for any type of car finance package, you may be required to tick a box or sign to say that you’ll be the main driver of the vehicle you’re applying for a loan for. If someone else is applying for you, this is then likely to be false – so if you lie and agree to the terms anyway, you could be committing ‘Fraud by false representation’ – according to the Fraud Act 2006.
Being found guilty of this kind of fraud can have a big impact on your ability to obtain credit in the future – and might even prevent you from having certain jobs. Put simply; it’s just not worth the risk.
Can you change car finance into someone else’s name?
We’re often asked if someone can refinance a car loan in someone else’s name – and while this could be coming close to being an accommodation agreement – the real reason is usually different.
In many cases, people assume that they can simply pass their finance deal to someone else if the new person wants that car and is willing to pay.
Since we’ve covered underwriting and risk already, you can probably see why this can’t happen – since the new person could be in a completely different situation to the new applicant. As such, you can’t pass a finance deal to someone else – instead, they’ll need to apply for their own finance package and set up a new finance deal from scratch.
It might seem unnecessarily complicated – but if you try to take shortcuts, you could find yourself on the wrong side of the law.