Can you afford the car, or just the finance payment?

A car is one of the biggest things most of us will ever buy. For many people, it is how they get to work, take the children to school and stay independent. Paying for it in one go is not an option for everyone, so many people use finance.

It is easy to forget that car finance is borrowing. When you take out car finance, you are borrowing money to pay for the car. With some agreements, such as hire purchase, the car does not belong to you until you make the final payment. And like any other lender, a car finance lender must check that you can afford the repayments without getting into financial difficulty.

In this article, we look at where those checks can fall short, what the Financial Ombudsman Service has said about it, and why it still matters in 2026.

Buying a car usually means borrowing

Finance is now the normal way to buy a car. Research published in 2025 found that the share of private new car buyers using finance grew from under 50% in the early 2000s to over 90% by 2018.¹ The same research notes that UK motor finance debt grew from £11.2 billion in 2009 to £40.7 billion in 2022. Over the same period, average weekly earnings rose by just 41%.²

Cars have changed too. Many cars, even second hand ones, now come with cameras, sensors and driver assistance systems. These make cars safer, but they can make repairs more complex. After some repairs, the sensors must be recalibrated to the manufacturer’s standards.³ Used cars have also become more expensive. The Office for National Statistics (ONS) price index for second hand cars was about 20% higher in 2025 than in 2019.⁴

None of this means car finance is a bad thing. It does mean the amounts involved are large, and the lender’s checks matter.

The car does not answer the affordability question

Some lenders may feel comfortable lending because, if payments stop, they can take the car back. That protects the lender. It does nothing to protect you.

The rules of the Financial Conduct Authority (FCA) separate two different risks.⁵ The first is the risk that the lender does not get its money back. The second is the risk that repaying will harm you. A lender must think about both.

When the FCA reviewed the motor finance market in 2019, it found that “In a small number of cases the focus appeared to be on credit risk, rather than affordability”.⁶ In other words, some lenders seemed more concerned with getting repaid than with whether the customer could afford it.

We have also seen lenders rely on a customer’s good payment record. In one decision against BMW Financial Services, the lender’s notes said the customer was “auto accepted” and had been an “A1 payer” on a previous agreement.⁷ The new agreement ran for 60 months at £888.33 a month. The Ombudsman called it “a significant amount of credit and a significant increase in monthly payments” and upheld the complaint. Paying on time in the past does not prove that a much bigger commitment is affordable today. Circumstances change.

Where affordability checks can fall short

A lender’s process can follow the rules on paper and still not be enough for the person applying. The right level of checking depends on the customer and on how much they are borrowing.

The examples below come from published Ombudsman decisions. Each one is a single case, so it does not prove that every lender behaves this way. Together, though, they show the kinds of problems that come up.

Estimating income instead of checking it

Some lenders use a tool from a credit reference agency that estimates your income from the money going into your bank account. That is not the same as looking at payslips or bank statements to see what you earn from your job, what other income you have and what you spend.

In a decision against Startline Motor Finance, the lender had used a credit reference agency tool “to analyse deposits into her bank account”. The Ombudsman said it “needed to do more in this case, given the risk, to check that Mrs M was actually in receipt of the income she’d declared.”⁸ In a decision against Moneybarn, the Ombudsman could not see “that it took steps to verify that he was in receipt of such an income each month”.⁹

Relying on statistics, not your real costs

Some lenders estimate what you spend using national statistics, often from the ONS. The FCA rules allow this. But a lender should not rely on statistics if it knows, or has reason to suspect, that your real spending is much higher. The same goes if the data is unlikely to reflect your situation.¹⁰

Averages do not describe everyone. A customer at the subprime end of the market, or with children to support, may spend far more on essentials than the statistics suggest. Their bank statements would often show this.

We have seen this in decisions against Black Horse. In one case, the customer had three dependants but had not declared any rent or other significant expenses. The Ombudsman said: “I don’t think relying on statistical datasets to estimate Mrs A’s living costs was reasonable here.”¹¹ In another, Black Horse’s own statistical estimate left the customer with about £100 a month, and even that estimate did not take her dependants into account.¹²

Having the evidence but not using it

Open banking lets a lender see your bank transactions securely, with your permission. It can give a much clearer picture than a credit report. But gathering the data is only the first step. The lender then has to read it properly.

In a decision against Marsh Finance, the lender ran an open banking check that “examined twelve month’s banking transactions”.¹³ The Ombudsman accepted that the checks themselves were reasonable. The problem was the decision the lender made. Working through the figures, the Ombudsman found the customer had about £14 a month left over, before paying anything towards a car finance repayment of £490.91. The complaint was upheld.

It is not hard to see why this happens. Going through bank statements line by line takes time. It is quicker to rely on a score, an estimate or a tick box.

Taking the customer’s word for it

Some lenders lean heavily on what the customer tells them. In one case, Audi Finance told the Ombudsman: “we do not ask for the customer’s income at the point of sale.” The Ombudsman said this “ignores the obligations placed on lenders to carry out a sufficient assessment of affordability.”¹⁴

In a more recent case, Marsh Finance said the customer “entered into the credit agreement on her own accord and was fully aware of the monthly contractual payments”. The Ombudsman was clear: “Mrs D’s declaration doesn’t mean the checks Marsh Finance completed were proportionate.”¹⁵ FCA guidance also says it is not generally enough to rely only on what a customer says about their income, without independent evidence.¹⁶

A signature shows you agreed to the payments. It does not show the lender checked you could afford them.

A £300 finance payment is not a £300 motoring budget

The monthly finance payment is only part of what a car costs. MoneyHelper, the free government backed money guidance service, lists insurance, car tax, repairs and maintenance, and fuel as costs to plan for.¹⁷

These costs can be large, especially for younger drivers. Confused.com’s price index shows drivers aged 17 to 20 were quoted an average of £1,813 for comprehensive cover in the second quarter of 2026.¹⁸ That is about £150 a month before you buy any fuel.

For a first car, these costs will not show up in your past bank statements, because you never had to pay them before. A lender that only looks at your history could miss them completely. In one decision against Audi Finance, the customer earned about £550 a month and her finance payments were £256.12. The Ombudsman said Audi would have known that her age and the new car meant a significant outlay for insurance. Once running costs were added, “it’s clear that Miss P’s had nowhere near enough in funds to meet the cost of this vehicle in a sustainable manner.”¹⁹

Weak checks do not always mean a successful claim

To be fair to lenders, poor checks do not automatically mean the finance was unaffordable. The Ombudsman asks whether the checks were reasonable and, if not, what better checks would probably have shown. Falling behind later on does not, by itself, prove the lending was wrong. In one case against Moneybarn, the customer’s car was later repossessed, but the Ombudsman found the checks reasonable and did not uphold the complaint.²⁰

That is why evidence matters. Your bank statements and credit report often show what the lender would have found if it had looked properly.

Why this matters in 2026

Car finance has been in the news because of commission. In March 2026, the FCA confirmed its motor finance redress scheme for customers who were not told about certain commission arrangements. But that scheme is about commission. The FCA has said that complaints about things like “affordability or creditworthiness assessments” sit outside it. You can still make those complaints to the lender under the normal rules, and then take them to the Financial Ombudsman Service.²¹

So if your car finance was unaffordable, the commission scheme will not look at that for you. It is a separate complaint.

Car finance is also one of the biggest sources of complaints. Hire purchase for motor vehicles was the product people complained about most to the Financial Ombudsman Service in 2025/26, with 37,700 complaints.²² These figures cover all kinds of motor hire purchase complaints, not only affordability.

What you could get back

If the lender should not have given you the finance, the aim is to put you back in the position you would have been in. Usually, this means a refund of the interest and charges you paid. Where money is refunded, interest may also be added to make up for the time you were without it. The lender is also usually told to remove negative information about the agreement from your credit file.^{13, 15}

Car finance has its own twist. If the agreement is still running, you may need to hand the car back, and the lender may deduct a fair amount for the use you had of it. Every case is different, and we cannot promise a result.

Think your car finance was not affordable?

You may have a claim if you struggled to keep up with your car finance repayments, or if the lender never looked properly at your income and outgoings.

Start your car finance claim

In short

• Car finance is borrowing, and the lender must check you can afford it
• Being able to take the car back protects the lender, not you
• Credit checks, income estimates, statistics and signed declarations can all fall short on their own
• A lender having your bank statements is not enough if it does not use them properly
• Insurance, fuel, tax and maintenance should be part of the picture, especially for a first car
• The FCA’s 2026 commission scheme does not cover affordability, so this is a separate complaint

Allegiant Finance Services Limited is authorised and regulated by the Financial Conduct Authority (FRN 836810). You do not need to use a claims management company to complain to your lender. If your complaint is not successful, you can take it to the Financial Ombudsman Service yourself for free. We only charge if your claim succeeds. Our fees range from 18% to 36% (including VAT) of the money you get back.

Sources

1. A Zokaityte, “UK Car Finance Mis-selling: Reassessing Legal and Regulatory Challenges within Consumer Credit Markets” (2025) European Journal of Risk Regulation, pages 2 and 19, citing Y Bhagat and others, “Car Ownership: Evidence Review” (National Centre for Social Research, 2024). https://doi.org/10.1017/err.2025.10052
2. Zokaityte (above), page 18, citing C Laverty and J Erceg, “Motor Finance Bracing for Headwinds” (Grant Thornton UK, 2023).
3. Thatcham Research, “ADAS: post-repair calibration to Vehicle Manufacturer tolerances is essential” (9 May 2019). https://news.thatcham.org/adas-post-repair-calibration-to-vehicle-manufacturer-tolerances-is-essential/?lang=eng
4. ONS, CPI index 07.1.1B: Second hand cars (2015=100), series D7E9, annual values 93.3 (2019) and 112.0 (2025). Percentage change is our calculation. https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/d7e9/mm23
5. FCA Handbook, CONC 5.2A.10R. https://www.handbook.fca.org.uk/handbook/CONC/5/2A.html
6. FCA, “Our work on motor finance: final findings” (March 2019), paragraph 5.8, page 20. https://www.fca.org.uk/publication/multi-firm-reviews/our-work-on-motor-finance-final-findings.pdf
7. Financial Ombudsman Service, DRN7820038 (BMW Financial Services (GB) Limited). https://www.financial-ombudsman.org.uk/decision/DRN7820038.pdf
8. Financial Ombudsman Service, DRN-3200278 (Startline Motor Finance Limited). https://www.financial-ombudsman.org.uk/decision/DRN-3200278.pdf
9. Financial Ombudsman Service, DRN-2693402 (Moneybarn No. 1 Limited). https://www.financial-ombudsman.org.uk/decision/DRN-2693402.pdf
10. FCA Handbook, CONC 5.2A.19G(1). https://www.handbook.fca.org.uk/handbook/CONC/5/2A.html
11. Financial Ombudsman Service, DRN-3203106 (Black Horse Limited). https://www.financial-ombudsman.org.uk/decision/DRN-3203106.pdf
12. Financial Ombudsman Service, DRN-2370441 (Black Horse Limited, trading as Land Rover Financial Services). https://www.financial-ombudsman.org.uk/decision/DRN-2370441.pdf
13. Financial Ombudsman Service, DRN-5733642 (Marsh Finance Limited). https://www.financial-ombudsman.org.uk/decision/DRN-5733642.pdf
14. Financial Ombudsman Service, DRN5143685 (Volkswagen Financial Services (UK) Limited, trading as Audi Finance). https://www.financial-ombudsman.org.uk/decision/DRN5143685.pdf
15. Financial Ombudsman Service, DRN-4961520 (Marsh Finance Limited). https://www.financial-ombudsman.org.uk/decision/DRN-4961520.pdf
16. FCA Handbook, CONC 5.2A.16G(3). https://www.handbook.fca.org.uk/handbook/CONC/5/2A.html
17. MoneyHelper, “Costs of buying and running a car”. https://www.moneyhelper.org.uk/en/everyday-money/buying-and-running-a-car/how-to-find-the-right-car-for-your-budget
18. Confused.com, “Car insurance average costs: the Confused.com Price Index”, section “Your age” (Q2 2026 figures, based on quotes, not premiums paid). https://www.confused.com/compare-car-insurance/average-car-insurance-cost-uk
19. Financial Ombudsman Service, DRN-2359140 (Volkswagen Financial Services (UK) Limited, trading as Audi Finance). https://www.financial-ombudsman.org.uk/decision/DRN-2359140.pdf
20. Financial Ombudsman Service, DRN-5893151 (Moneybarn No. 1 Limited). https://www.financial-ombudsman.org.uk/decision/DRN-5893151.pdf
21. FCA, PS26/3 “Motor finance consumer redress scheme” (March 2026), paragraph 3.9. https://www.fca.org.uk/publication/policy/ps26-3.pdf
22. Financial Ombudsman Service, “Annual complaints data and insight 2025/26” (21 May 2026), section “Trends across the year in financial products”. https://www.financial-ombudsman.org.uk/businesses/resolving-complaint/our-insight/annual-complaints-data-and-insight-2025-26