What is black box car finance?

When you hear the term black box, you may think of the device used to record flight information on a plane or the boxes installed to monitor your driving habits. Black box car finance works differently. In fact, it doesn’t look at your journey or driving style at all. Instead of taking note of how hard you’re braking or how often you venture out after dark, the black box will keep track of your car finance payments.

The black box itself is a small device that will be fitted in your car and connected to its internal computer. It is typically installed underneath your dashboard or glovebox and communicates directly with your lender through GPRS. 

Black box car finance is designed to help borrowers keep up with their car finance repayments by sending reminders ahead of the payment due date. This means that it may be a good option for people with bad credit or those who have been refused other types of finance, as it reassures the lender that payments will be made on time.

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Salesperson holding car key

How does black box car finance work?

Black box car finance is typically offered alongside a hire purchase loan agreement. Hire purchase (HP) car finance allows you to spread the cost of a new or used vehicle into manageable monthly repayments. You may need to put down an initial deposit and then make fixed payments for a period that typically lasts between two and five years. When you reach the end of your agreement, you can pay a small ‘Option to Purchase’ admin fee to take ownership of the car.

Hire purchase agreements are secured against the vehicle, which means you won’t be the car’s legal owner until all your repayments have been made. But you will be the car’s registered keeper, making you responsible for its maintenance, fuel costs, service, road tax, and MOT. You won’t be able to sell or modify the car during your loan agreement.

With black box car finance, you’ll receive a reminder each time your monthly repayment is due.

Depending on the type of black box you have fitted and the lender who issued your loan, you’ll typically be reminded a few days before the actual payment date. If the box has a light, it might turn red and start flashing. You may also receive a reminder text.

Once you’ve made the payment, the box will either reset itself or ask you to enter an activation code to turn off the flashing light. At the end of your loan term, if all your repayments have been made, the black box will be removed.  

Can I remove the black box before my agreement ends?

No. The black box can only be removed at the end of the finance agreement once all repayments have been made. Early or unauthorised removal of the box is likely to violate the terms of your agreement.

Is black box car finance right for me?

If you’ve found it hard to keep up with your repayments in the past or have a bad credit score, you may consider black box car finance to be a viable option. Knowing that you’ll be notified each time your next payment is due can give you the peace of mind that you won’t forget to pay, while it also reassures the lender that they are likely to receive their funds on time.

As black box car finance is usually offered with HP car finance, it  tends to be favoured by those who want to own their car and can afford to make higher monthly repayments than those offered with personal contract purchase (PCP).

However, if you’d like to have lower repayments, own the car straight away, or have the option to return the car at the end of your loan term, you might wish to explore different types of car finance that may better suit your needs.

Can I get black box car finance with bad credit?

Black box car finance may be considered an option if you’ve had problems making finance payments in the past or have a bad credit rating. Not only does this type of loan offer certain safeguards to lenders, but it also demonstrates that you’re serious about making payments on time and are prepared to take steps to ensure you keep up with the loan. And if you do manage to make all your repayments on time thanks to the black box reminders, your car loan could help you demonstrate that you’re a responsible borrower and improve your credit score over time.

What happens if I miss a repayment?

Don’t worry. If you receive a reminder but don’t make your payment on time, it’s unlikely that anything will happen immediately. We’re all human and late payments can happen, regardless of our best intentions. In fact, some lenders offer a grace period of up to 30 days to cover these eventualities (check your agreement to see if this applies). However, if you don’t make the payment by the time the grace period ends, the GPRS system controlling the black box can remotely deactivate your vehicle.

There’s no danger involved. Deactivation will only happen while the car is left idle for a time, not when you’re cruising down the motorway at 70mph! Even so, if your vehicle is deactivated by the lender, you won’t be able to drive it and it may be at risk of repossession.

What is pay as you go car finance?

Pay-as-you-go (PAYG) car finance is another term that might be used to describe black box car finance. It works in the same way, with a black box fitted for the duration of your HP loan term so that you can be sent reminders ahead of each monthly repayment.

PAYG car finance shouldn’t be confused with pay-as-you-go mobile contracts that you can choose to top up or leave without any credit. When you sign your car finance agreement, you will be committing to making repayments throughout the loan term until either the finance has been repaid or you have paid the settlement figure to end the agreement early.  

Can I get black box car finance with no credit check?

A credit check is an important part of the car finance process and you’re unlikely to be able to secure black box car finance without one. Two credit checks may take place. The first is a soft credit check to find out whether you’re eligible for the finance. The second is a hard credit check, which is made when you apply for the finance and will be visible to other lenders viewing your credit report. These checks help lenders understand how you’ve acted as a borrower in the past as well as ensure that the loan is suitable for your circumstances.

No car finance loan is guaranteed, and all lenders carry out eligibility checks to make sure that you will be able to afford your black box car finance repayments.

What is black box car insurance?

Unlike black box car finance, black box car insurance monitors your driving. Originally designed for young drivers but now available to most people, black box or telematics car insurance involves the installation of a GPS tracking device in your car. This device can track several things, including how you brake, how fast you drive, what times you drive, how many miles you cover, and how often you stop to take a break during long journeys. Your black box insurer will use this data to give your driving a score, which can then affect your insurance premium.

Different black box car insurance rules apply depending on the insurer. Some require drivers to have a clean driving licence and claims history, while others ask you to agree not to travel after dark, for example.

Should I get black box car insurance?

That depends on your individual needs and circumstances. If you’re a new driver, you could benefit from cheaper car insurance payments if the black box shows that you’re a sensible driver. It can also encourage you to be a safer driver if you may pay more attention to the way you drive. The GPS tech held within the black box can also be used by local police forces to track your car if it’s stolen.

However, if you’re not a careful driver, you may find that your insurance premiums increase after having a black box fitted. Your insurance can also be cancelled if you’re found to be a reckless or dangerous driver. Charges may apply to have the black box installed or removed, and you may have to agree to strict terms and conditions, such as a driving curfew or mileage limit.

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*Representative example: Borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed) and a deposit of £0.00, the amount payable would be £166.07 per month, with a total cost of credit of £3,464.37 and a total amount payable of £9,964.37. Rates may differ as they are dependent on individual circumstances. Subject to status. We're a credit broker, not a lender.

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