Why do car finance companies ask for bank statements?
2 April 2023
By Joy Pearson
No matter what your applying for, when a company asks for an insight into your earnings and anything money related, I think it's safe to say that we all tend to get our backs up a little. Totally normal by the way. Let me reassure you now, when you're in the market for a new car or vehicle and you're asked to show your bank statements, this is actually to benefit you, if you carry on reading I will explain why.
Pretty much every car finance company or lender will at some point throughout your journey need to verify your income and expenses to ensure you can, most importantly, afford the monthly repayments for the finance. By reviewing your bank statements, lenders can see your income and any regular outgoings such as bills, rent/mortgage payments and other loan repayments. This information is essential to determine whether you can afford the car finance payments and it also ensures responsible lending practises. Let's say a car finance company didn't perform this check and further down the line you started issuing payments and could no longer afford or keep up with your repayments, I'm sure you would think it was irresponsible of the lender to give you finance that you can't afford, right?
Another reason car finance companies and lenders will ask for your bank statements is to assess your financial stability. The finance company needs to ensure that you can meet the loan repayments on time and in full. By reviewing your statements, they can assess whether you have a stable income, sufficient funds in your account and a good payment history. Again, say we put the shoe on the other foot, and it was you who was lending money to a stranger, I am confident that you would want to know of you would get your money back?
Now for probably the most important reason, and this is purely to benefit you, every car finance company or lender will ask for bank statements as a fraud prevention measure. They need to ensure that the loan application is not fraudulent and that the borrower is who they say they are. By reviewing your bank statements, both lender and car finance company can verify your identity, and other personal information provided in the loan application.
Once I came to understand all of the above, providing bank statements for car finance is a small price to pay for the peace of mind knowing that you can comfortably afford the repayments. It's also a great way to ensure responsible lending practises and prevent fraud. Now you can't argue with that.