Car leasing and car finance for unemployed people in Ireland

Why leasing is hard to get without a wage

Leasing means paying to use a car for a fixed period without becoming its owner. The company that owns the vehicle needs confidence that the payments will arrive every month for the whole agreement, which can run for several years. For someone living on a jobseeker payment, that certainty is difficult to demonstrate.

That difference matters when your income is a social welfare payment. A lessor is committing a valuable asset to you for several years, so it looks hard at stability.

Lease, hire purchase or PCP: what you are actually signing

With hire purchase, the finance company owns the car until the last instalment and a closing fee are paid, then ownership passes to you. PTSB Asset Finance, for example, describes a fixed rate, terms of two to six years and a purchase fee at the end. AIB also offers HP and PCP, but only through its approved motor dealers.

Terms differ between companies, so one refusal does not mean every company will refuse. No lender can promise approval before looking at your file, and anyone who does should be avoided.

• Hire purchase: you end up owning the car, with higher monthly payments.
• PCP: lower monthly payments, but a large final sum if you want to keep the car.
• Lease: you hand the car back, so there is no asset at the end.

What a finance company looks at when your income is a benefit

A lender has to assess whether you can afford the repayments before it lends. Typical checks include proof of identity and address, your PPS number, evidence of regular income, your other commitments and your record on the Central Credit Register. AIB, for instance, lists employment details, income and monthly expenses among the information it may request.

Jobseeker payments are genuine income, but many lenders weigh them cautiously on a long agreement because the payment can change or end. Some look more favourably on a joint application with a working partner, a larger deposit or a guarantor where the lender allows one. Policies differ, so a single refusal does not close every door.

Hire purchase providers also set conditions about the car. PTSB, for example, asks for a deposit of at least 10 per cent, with the VAT element included, and limits the age and mileage of the vehicle.

Costs to compare beyond the monthly payment

Compare offers using the APR, the total cost of credit and the total amount repayable, never the monthly figure alone. A longer term lowers each payment but raises what you pay overall. PTSB's published example of €20,000 over five years shows a total cost of credit of about €4,746; your own figure depends on the rate you are offered.

Remember the costs outside the contract: motor insurance, motor tax, the NCT, servicing and fuel. On a reduced income these can be harder to carry than the repayment itself.

An illustrative scenario: needing a car for a rural job

Picture a woman in County Mayo who has received Jobseeker's Allowance for several months and has a job offer in a town with no bus service. A dealer proposes a PCP with a pleasantly low monthly payment, but a large final payment follows.

She asks for the total cost of credit, the final payment and the mileage allowance in writing, then compares them with a used car bought using a loan from her local credit union. The PCP looks cheaper each month, yet the loan leaves her owning the car with no balloon to find. The example is invented; real offers differ.

Routes to try before a lease or PCP

A conventional loan often suits a low income better than a lease, because you own the car from day one and there is no end-of-contract payment. Credit unions are limited by law to a maximum interest rate of 12 per cent a year, which is 12.68 per cent APR, and many charge less. Banks such as AIB and PTSB also lend for cars, subject to their own criteria.

A smaller, older car bought with a modest credit union loan, or with savings, would carry lower insurance and no mileage penalty. The example is only a way of thinking about the trade-off, not a forecast of any lender's decision.

Before deciding, test your budget with the free My Budget tool from MABS, the Money Advice and Budgeting Service.

Warning signs and how to protect yourself

Be wary of anyone who promises to arrange a lease whatever your credit history, or who asks for a fee in advance to release a deal. Legitimate lenders take their charges within the agreement and send you written terms to read before you sign. Check that the firm appears on the Central Bank of Ireland's register of authorised firms.

Do not sign an agreement you have not read in full, and keep a copy. If you cannot meet a payment, contact the finance company at once and ask MABS for help.