What lenders look at for car finance in New Zealand

The short answer

Think of a lender’s checks as six questions, asked roughly in this order of weight:

1. Can you afford the repayments after your other costs?
2. What does your credit file say about how you have handled debt?
3. What do your bank statements show about how you actually live?
4. How settled is your income, job and address?
5. What is the car worth, and how much are you putting in?
6. Are your details consistent and verifiable?

Different lenders weigh these differently, and a weakness in one can sometimes be offset by strength in another. This page goes through each one, covers what unpaid fines do, and finishes with a worked example and a checklist.

The law behind the questions

Lenders do not ask these questions out of nosiness. Under the Credit Contracts and Consumer Finance Act, a lender must make reasonable inquiries so that it is satisfied you are likely to be able to make the repayments without suffering substantial hardship. It must also check that the loan suits your needs, such as the amount, the purpose, any extra products and how you want to repay.

Consumer Protection says those inquiries can include asking for evidence of your income and about your expenses, and that the Responsible Lending Code was updated from 31 July 2024 to give lenders more flexibility in assessing affordability. The lender also has to be careful about the facts you give. If you understate your costs or overstate your income, you risk a loan that does not fit. Our rights with a car loan page explains what you can expect from a lender.

1. Affordability

MTF says it is primarily concerned with whether you can make repayments comfortably, not with how much you earn. Instant Finance puts it as whether you can comfortably afford repayments based on what is actually coming in and going out.

In practice a lender takes your income, subtracts your regular outgoings and existing debt repayments, and sees what is left. Typical outgoings include rent or mortgage, food, power, transport, insurance, phone and internet, childcare and other loan repayments. The proposed repayment has to fit in what remains, with some room.

You can do this check yourself before you apply. Our borrowing guide and the repayment calculator help with the numbers.

2. Your credit file

New Zealand has three credit reporting companies: Centrix, Equifax and Experian (formerly illion). Lenders can use any of them. Equifax says enquiries stay for four years, account repayment history for up to 24 months, and defaults and judgments for five years. A single bankruptcy or No Asset Procedure stays four years from discharge.

MTF says it assesses each application individually and that a less-than-perfect history may not stop you getting finance, but can affect your interest rate or loan terms. Our page on low credit score car finance covers how a low score is used, and improving your score before applying covers what to fix.

3. Your bank statements

Statements show what a payslip cannot: how you really spend. Instant Finance says it asks for the last three months of statements, and Trade Me’s used-car-finance guide mentions around 90 days, sometimes analysed automatically to check that income is consistent.

Things that stand out to a lender:

• Dishonoured or failed payments. Instant Finance says recent failed payments matter more than an older default, because they are a clear signal about current behaviour.
• Regular income arriving. Wages or benefit payments on a pattern look steady.
• Gambling, buy now pay later top-ups or payday loan repayments. These may make a lender question affordability.
• Overdrawn balances.

If a bad month is coming up, wait until after it if you can. Three clean months read better than three with a fight in the middle.

4. Stability

Lenders like to see income that looks likely to continue and an address that is not changing. MTF says full-time employment is not required, and that self-employed, part-time workers and benefit recipients can often be offered finance, subject to affordability. What matters is that the income is real and provable.

If your income varies, see our pages for contractors and casual workers.

5. The car and the deposit

A car loan is usually secured on the car, which means the lender can take it back if you default. MTF says the vehicle you borrow against is almost always used as security. So the lender cares about the car’s value, age and condition, and about whether it has other finance registered against it.

A deposit reduces how much you borrow. MTF says many lenders can offer vehicle finance with no deposit, depending on your circumstances and the amount. Trade Me’s guide mentions deposits of roughly 10 to 20 percent as helpful. A deposit is a plus, not a rule. See how much deposit you need.

6. Identity and consistency

Trade Me’s guide lists photo ID, such as an NZ driver licence or passport, and proof of address dated within the last three months. It also says details on the application should match your ID and bank statements to avoid delays. A mismatched name, a missing document or an address that differs between two forms can slow a good application more than you would expect.

Fines owing

Fines are the part most guides skip, and they matter in two ways.

They can appear on your credit report. The Ministry of Justice says your credit report will include any unpaid and overdue fines, and that this can stop you being approved for credit, loans, hire purchase and buy now, pay later services.

They can threaten the car and your ability to drive. The Ministry says that if payments are missed, the court can take enforcement action and an enforcement fee of $133 can be added. It says bailiffs and Police can seize or clamp your vehicle, that a warrant can be issued to seize and sell your vehicle and other possessions, that your licence can be suspended for overdue traffic fines or reparation, and that the court can take money directly from your bank account or from wages or benefits.

For a lender, a car you may lose to a bailiff is poor security, and a borrower whose bank account can be raided has less income available for repayments.

What to do:

1. Find out what you owe. Contact the Ministry of Justice using the number on its website. It warns that it does not send payment links by text or email, so do not click links in messages.
2. Ask for a payment plan before you miss a payment. The Ministry says to call before a payment is missed or if you expect to miss one.
3. Keep the plan going. A broken plan can lead to enforcement.
4. Check your credit reports to see how the fines appear.
5. Then apply, once the plan is steady and you can show it in your bank statements.

We have no sourced information on how a particular lender treats a fine on a plan compared with one in arrears, so ask the lender. Free help with fines and debts is available. See debt help and financial mentors.

A worked example

These are made-up figures to show how the thinking works.

A borrower earns $4,200 a month after tax. Rent is $1,500, food and household $700, power and phone $250, transport and insurance $350, and an existing personal loan costs $180. That leaves $1,220. A $15,000 car loan over four years at an illustrative 16% would cost about $425 a month. After that, $795 remains for everything else, including tax surprises, school costs and car running costs.

Now add a $2,000 unpaid fine with no plan. On the Ministry’s description, it can show on the credit report and lead to enforcement. The borrower calls, agrees a plan of $60 a week, about $260 a month. The remaining margin drops to about $535 and a lender is more likely to look hard at the loan size. A smaller loan, a deposit or a cheaper car could change the result.

Nobody outside the lender can say what it will decide. The point is that fines are both a credit-file issue and a cash-flow issue.

What you can control before you apply

• Get your credit reports and fix mistakes.
• Set up payment plans for fines and overdue accounts.
• Keep three clean months of statements.
• Collect ID, proof of address and proof of income.
• Choose a car that fits the budget with room to spare.
• Make one application, not several. Our soft credit check entry explains how you can compare options without a hard enquiry at each one.

Red flags

• A lender or broker who will not say what it needs from you.
• Anyone promising approval before they have seen your documents.
• A request to hide debts or fines on the application. Give accurate information.
• A car with money owing on it. Do a PPSR check.
• A fee requested up front before any loan is arranged.
• A text or email asking you to pay a fine through a link.

How Fair Finance helps

Fair Finance is a referral service. It is not a lender, a broker or a financial adviser, and it gives no personal advice. One application and one soft credit check go to a panel of approved New Zealand lenders, so you can see options without a hard check at each one. Each lender decides case by case. Fair Finance is paid by the lender only if a loan settles, and that never changes your rate. Use the quick check to begin.

Checklist

• Income and monthly outgoings written down
• Repayment tested against what is left over
• Credit reports from all three bureaus checked
• Fines and overdue accounts on a payment plan
• Three months of bank statements ready, free of failed payments
• ID and proof of address matching your application
• Car chosen, with a deposit if you can
• Rate, fees and total cost in writing

General information only, not financial advice. Lender policies and rules change, so check the official pages below.

Sources

• Consumer Protection: What lenders must do
• Ministry of Justice: Unpaid fines and what happens next
• Equifax My Credit File: How long is information held in my credit file?
• Consumer Protection: Credit checks, scores and history
• MTF: Vehicle finance myths busted