View our guide to accommodation finance below.
When a customer takes out a vehicle finance contract for someone else and therefore, are not the main driver of the vehicle, it is known as accommodation finance.
Despite being legal, accommodation finance is strictly forbidden by all finance companies.
Even if the customer can afford the repayments, beyond any doubt, it is still forbidden due to the RISK Factor to the finance company - If the person responsible for the repayments does not drive the vehicle, there is a much greater risk of the finance company not being able to get the vehicle or their money back.
Most of accommodation finance cases are agreements between family members or someone with a very close relationship to the driver. One party agrees to take on the finance agreement under the condition that the driver pays them back. The Finance companies risk comes from a breakdown in that relationship during the contract period, for example – a mother taking out car finance for her 18-year-old son with poor credit. After a year the mother and son have a disagreement over the son’s repayments and the son decides to leave with the vehicle. The mother is still responsible for the repayments to the finance company but has no legal recourse to get the vehicle back. The finance company now has no way of retrieving the vehicle at the end of the contract.
Due to today’s financial climate, accommodation finance applications have become more and more common. The Finance Companies are aware of this and are cracking down on their credit checks; even to the point of declining all applications from the same address, where the original application was declined due to poor credit.
As stated above taking on car finance for someone else is not illegal BUT not declaring you are doing so is FRAUD and therefore becomes illegal. In the terms and conditions of a finance agreement, there is usually a statement which says - the person taking on the finance is the main driver – If you state this is true when it is not, that is fraud.
Both, the person driving the vehicle and the person who took on the finance, will be charged with fraud in attempting to deceive a finance company. This could lead to a criminal record or at the very least a black mark on their credit histories, which will affect all future financial requests.