Why Was My Car Loan Application Denied?

Find out why you were declined and what you can do about it.
Published on June 11th, 2020
  Written by 
Adrian Edlington
Adrian Edlington is PR & Communications Manager at Savvy. With a keen interest in personal finance, car loans, the mortgage industry, cost of living pressures, electric vehicles and renewable technology, Adrian's research includes conducting primary data surveys and analysis of up-to-the-minute secondary Australian data sources. His work on behalf of Savvy has been featured on ABC.net.au The Conversation, the Sydney Morning Herald, AFR, News.com.au, The Age, Herald Sun, Adelaide Now, SBS On The Money, 7News, Car Expert, Which Car, Drive.com.au and more. In his spare time, Adrian enjoys mountain biking and business podcasts.
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   Reviewed by 
Bill Tsouvalas


Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Purchasing a car is a significant investment and securing finance is often an essential part of the process. Having your car loan application denied can therefore be a major setback. In this blog, we'll discuss the common reasons for rejection and what you can do about it.

Check your paperwork

Ensure all information provided in your application is accurate, complete and up to date. Missing information or inconsistencies can raise red flags for lenders and is one of the most common reasons for application denial. Lenders rely heavily on the documentation you provide to assess your financial situation and creditworthiness. Incomplete or incorrect paperwork can delay the process, or worse, lead to a rejection. Here's what you need to be mindful of:

  • Gather all required documents: this typically includes proof of identity, income and residency, as well as any additional documents requested by the lender.
  • Ensure accuracy: double-check all information entered in the application form for typos or errors, including income figures, addresses and vehicle details. Discrepancies can raise doubts about your financial stability and trustworthiness.
  • Organise your documents: clearly label and present all required documents in a neat and organised manner for easy review by the lender. This saves them time and demonstrates your attention to detail.

By being thorough and meticulous with your paperwork, you can avoid unnecessary delays and increase your chances of a smooth loan approval process.

Other reasons for rejection

Even if your documentation is in order, there are a number of other reasons your car loan application may be denied. This includes:

  • Income: your income plays a significant role in a lender’s decision to offer formal approval. They will consider how much you earn and your financial obligations to determine if your income level is sufficient to support the car loan payment.
  • Insufficient credit history: without a credit history demonstrating responsible borrowing and repayment behaviour, lenders might consider you a high-risk borrower and deny your application. A credit history includes current and previous loans for the past five years, past and present employers and any defaults or overdue accounts. 
  • Low credit score: a low credit score indicates a higher risk of missed or late payments, making lenders hesitant to approve your loan.
  • High debt-to-income ratio (DTI): your DTI ratio compares your monthly debt payments to your gross monthly income. A high DTI indicates a significant portion of your income goes towards existing debts, leaving less room for additional loan repayments. This raises concerns about your ability to manage another loan payment.
  • Employment status: lenders prefer borrowers with stable and consistent employment income. Being unemployed, underemployed or having a short employment history can negatively impact your application.
  • Negative credit events: delinquencies, defaults, repossessions or bankruptcies on past loans or credit cards can significantly impact your credit score and negatively affect your loan application.

Additional factors to consider

If you are considering applying for a car loan, also take into account the following factors:

  • Loan amount: the loan amount you request directly impacts your eligibility. A larger loan amount might be challenging to secure if your financial situation doesn't support it.
  • Down payment: a larger down payment demonstrates financial commitment and reduces the lender's risk. It can improve your chances of getting approved and potentially qualify you for better loan terms.
  • Co-signer: having a co-signer with a strong credit score and stable income can strengthen your application and improve your chances of approval. However, be aware of the potential risks and responsibilities involved in involving a co-signer. Alternatively, you may be able to use a guarantor.

What to do after a denial

After your loan application is denied, it's important to take action. Here's what you can do next to improve your chances of getting approved in the future.

  • Understand the reason for denial: contact the lender and inquire about the specific reason for your application's rejection. This knowledge allows you to address the concerns and improve your chances in the future.
  • Obtain your credit report: request a copy of your credit report from one of the major credit reporting agencies (in Australia, these are Equifax, Experian and illion) to review for any errors or inaccuracies. If you find errors, dispute them.
  • Improve your credit score: take steps to improve your credit score, such as paying bills on time, reducing your debt-to-income ratio and utilising your credit responsibly.
  • Reassess your needs and budget: realistically evaluate your current financial situation and car needs. Consider a lower loan amount, a more affordable car or delaying your purchase until your financial situation improves.

More tips for finding a car loan

When seeking car finance, it's essential to explore all your options. Here are some additional tips to consider when looking for the right car loan:

  • Shop around for different lenders: compare loan rates and terms from various lenders before applying. This can help you secure the best possible deal and improve your chances of approval.
  • Be transparent and honest: when applying for a loan, be upfront and honest about your financial situation. Trying to hide information can lead to further problems down the line.
  • Look for pre-approval: getting pre-approved for a car loan can give you a better idea of how much you can afford to spend and streamline the buying process.

Bill Tsouvalas, Managing Director of Savvy, said:

"Applying for a car loan isn't about luck, it's about preparation. Think of it like a driving test – you wouldn't get behind the wheel without knowing the rules of the road first. If you’ve been rejected for car finance, don’t be discouraged. Recognising your weak spots, taking proactive steps and being well-prepared can all help to increase your chances of car loan approval."

Getting your car loan application denied doesn't have to be the end of the road. Once you understand why it has been rejected, you can take steps to address the issues and improve your chances of securing a loan next time round. If you’re ready to explore your car loan options, Savvy can help. Our hands-on team can provide support throughout the process, from comparing loans to securing the best available deal for your needs. Get started with Savvy today.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for car loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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