Car finance after a divorce or separation

The short answer

Getting car finance after a divorce is possible, but there are two separate problems and they are easy to mix up.

1. The old loan. If you and your ex have a joint car loan, the lender’s contract is with both of you. Your private arrangement about who pays does not automatically change that.
2. The new loan. If you need a car in your own name, a lender will look at what you can afford now, on one income, with the credit file you have today.

Nobody can promise approval. Each lender decides case by case. This page walks through both jobs, what to gather, and how to avoid the common traps.

Job one: sort out the old joint car loan

Why the lender matters more than your agreement

When two people sign a car loan, the lender has a contract with both. A separation agreement, or a verbal deal that “you keep the car and pay it”, is between you and your ex. The lender did not sign it. So if payments stop, the lender can still look to both borrowers. Ask your lender in writing what it will and will not accept before you rely on any arrangement.

The Community Law Manual explains that debts in a relationship are sorted into personal debts and relationship debts. Relationship debts include joint debts and debts taken out to buy or maintain relationship property. The family car is usually relationship property regardless of who paid for it, so a loan for it may well be a relationship debt. When relationship property is divided, those debts are subtracted first, which is how the two of you end up sharing them. This is general information, not legal advice, so check your own position with a lawyer or a free Community Law Centre.

The Ministry of Justice says you can divide property yourselves, but for an agreement to be enforceable through the court it must be in writing and both of you must have had independent legal advice. It also says you generally need to apply to the Family Court within one year of a divorce, or three years after a de facto relationship ends, though you can ask for permission to apply later. Those timeframes are worth knowing before the details fade.

Your options for the old loan

• Keep paying it together until the car is dealt with. Simple, but it ties you to someone you no longer want to depend on.
• One person takes the car and a new loan. That person applies for a new loan in their own name. If it is approved and settles, it pays out the joint loan, and the lender releases both of you from the old one. This is a fresh application assessed on one income, so it is not a given.
• Sell the car. The sale price goes to the lender first. If the car is worth less than the payout, you are left with a shortfall. Our page on selling a car with finance owing explains the steps, and the glossary entry on negative equity explains the gap.
• Hand the problem to the lender early. If you cannot afford the payments, ask about hardship before you fall behind.

If you cannot keep up the payments

The Commerce Commission’s guidance says to talk to the lender early. Lenders usually prefer to change the repayments rather than deal with missed payments. Hardship applications cover events such as job loss, serious illness and relationship breakdown. You apply in writing, say what you want (more time, a payment holiday or both), describe the event and include proof. The Commission says you generally need to be less than two months behind, so move quickly. The lender must give you a decision and reasons within 20 working days, cannot charge a fee to consider the request, and must suspend any repossession until it decides.

A free financial mentor can check your rights and talk to your lender for you. MoneyTalks offers free, confidential help. Our guide on struggling to pay your car loan goes through the steps.

Job two: borrow in your own name on one income

What changes when you are on one income

Lenders must make reasonable inquiries so they are satisfied you can make the repayments without substantial hardship. That means asking about your income and your spending, and they can ask for evidence. The Commerce Commission notes that the affordability regulations were removed on 31 July 2024 and the Responsible Lending Code updated, which gave lenders more flexibility in how they check, but the duty to check is still there.

For someone newly on one income, that usually means:

• Your income now, not before. A lender wants current payslips or bank statements showing what comes in today.
• Your new spending. Rent or a mortgage on one income, power, food and childcare change, and lenders will ask about them.
• Other debts. Anything still in your name, including the joint loan if it has not been cleared.
• How long you have been in your job. A recent job change is not a bar, but lenders look at stability.

Other income can matter too. If you receive child support, spousal maintenance or Working for Families payments, ask whether a lender will count them and what evidence it needs. Our page on Working for Families and car finance covers the Working for Families side. Lenders decide this case by case, so we cannot tell you any particular payment will be accepted.

Your credit file after a split

Divorce is not recorded on a credit file, but shared accounts are. Missed payments on a joint loan, credit card or utility can show against both names. Before you apply:

1. Get your own report from Centrix, Equifax or Experian (formerly illion). They are free. See how to get a free credit report.
2. Check every joint account and ask whether each is up to date.
3. If something is wrong, contact the organisation that supplied it. Our page on removing a default explains how that works.
4. Do not apply to several lenders one after another. Each application can lower your score. A single soft credit check route avoids stacking hard enquiries.

If your file already has marks, see low credit score car finance.

A worked example

This is an illustration with round numbers, not a quote or a prediction. Use the repayment calculator with your own figures.

Say a person is buying a $12,000 car with a $1,500 deposit, so they borrow $10,500 over four years at an illustrative 15% a year. That works out to about $292 a month. Their monthly picture on one income might look like this.

Item	Per month (illustrative)
Take-home pay	$3,600
Rent	$1,500
Power, phone, internet	$300
Food and household	$700
Insurance (car)	$120
Fuel and registration	$200
Existing debts	$150
Remaining before the car loan	$630
Car loan repayment	$292
Left over	$338

The lender will use its own method, but you can see the point. A modest loan leaves room. A $20,000 car with the same deposit and rate would be about $515 a month, and the same budget would leave only about $115. If the numbers are tight, a cheaper car or a bigger deposit changes the picture more than a different lender will.

Step by step

1. Write down every account in joint names and who is paying each.
2. Ask each lender in writing for the payout figure and what it needs to release a borrower.
3. Get free advice. A Community Law Centre, Citizens Advice Bureau or a lawyer can explain relationship property. Sorted lists these services and points to employee assistance programmes for free financial advice.
4. Build a one-income budget. Sorted’s separation guide suggests keeping track of money and everything you both own.
5. Collect evidence of income: recent payslips or bank statements, and for any other income the letters or statements that show it.
6. Check your credit reports from all three bureaus.
7. Decide the car and the budget before you talk to a lender, not after.
8. Apply once through a route that uses a soft check, and compare the total cost of the loan, not just the repayment.

Red flags

• Someone promising approval before they have seen your income and credit file.
• Leaving your name on a loan “because my ex said they would pay”. If they stop, the lender can still come to you.
• A new loan on a car you do not own or cannot insure. Do a PPSR check and make sure you know who the registered owner is.
• Signing anything as a guarantor for an ex or a new partner. Read the guide to joint and guarantor car finance first.
• A very long term used only to make the repayment look small. The total cost climbs.
• Fees that were not explained. Ask for the total repayment in writing.

Cheaper alternatives

If the numbers do not stretch, think about a cheaper car, keeping the car you have if the loan can be sorted, a larger deposit, or waiting a few months while you build a track record on your own accounts. If you are on a low income, see low income car finance. If you are a sole parent, our page on single mum car finance covers what lenders look at.

How Fair Finance helps

Fair Finance is a referral service, not a lender, broker or financial adviser, and we give no personalised advice. One application and one soft credit check go to a panel of approved New Zealand lenders, and each lender decides case by case. Fair Finance is paid by the lender only if a loan settles, and that never changes your rate. We cannot decide who owes what on a joint loan or give legal advice, so take that to a lawyer or a free advice service. When you are ready for a new loan, start with the quick check.

Checklist

• List of every joint account and who pays it
• Payout figure for the old car loan, in writing
• Free legal or Community Law advice on relationship property
• One-income budget
• Recent payslips or bank statements
• Evidence of any other income you want counted
• Credit reports from Centrix, Equifax and Experian
• Car, price and deposit decided
• PPSR check done on the car

General information only, not financial or legal advice. Rules and lender policies change, so check the official pages below.

Sources

• Ministry of Justice: Divide relationship property
• Sorted: Separating
• Community Law Manual: Classifying and valuing relationship property
• Commerce Commission: Payment problems
• Commerce Commission: What lenders must do
• Commerce Commission: Credit checks, scores and history