Fronting

Definition

In car finance terms, fronting is a fraudulent act that occurs when one person takes out a Credit Agreement on behalf of another.

This is considered a criminal offence and can lead to prosecution and large fines.

Examples of fronting

In some cases, fronting occurs when an individual cannot get accepted for finance themselves.

Alternatively, they may want to try and take advantage of a friend or family member’s excellent Credit Rating, to access better Interest Rates.

But often, individuals may not even realise that this is considered fraud and is against the law. So, to help you stay on the right side of the law, we’ve listed a couple of fronting examples below.

Example 1:

Julie has bad credit and is struggling to get accepted for finance. Her friend Laura has an excellent Credit Profile, so agrees to apply for finance on behalf of Julie.

Laura is the policy holder, and her name is on the finance documents and the V5 logbook. But Julie is keeping the car and sending Laura money each month, to cover the Monthly Payments.

This is not only illegal – but also put’s Laura’s credit profile at risk. As if Julie is unable to maintain her monthly payments, Laura is responsible for repaying the loan.

If neither party can maintain the payments, the lender may seek to Repossess the vehicle. If Julie is keeping the car, the lender will struggle to locate the vehicle and may seek police intervention.

Example 2: 

John wants to help his son Tom, get his first car. John takes out car finance, then changes the name on the V5 document. John is paying the finance, but Tom owns and drives the car.

This is one of the most common forms of fronting, and often occurs when parents look to buy a car for their child, or between couples where one partner earns more than the other so can afford a more expensive finance agreement.

How to avoid fronting

If you want to help a friend or family member get car finance, you can always submit a Joint Application or act as a Guarantor.

Both options are perfectly legal as you are known to the lender at the start of the contract, and most importantly they have your details if they need to contact you.