Posted by Alex Antony ● 12 February, 2019

Car Loans for Self Employed: The Complete Guide

In this guide we’ll be walking you through the car loan process for business owners and self employed as well as the general requirements needed and options available to secure a car loan.

How to use this guide:

  1. Read through the article in order to educate yourself about the options available to you, what requirements are needed, and what you can do in order to increase your chances of getting approved.
  2. Download the checklist so you can keep track of your progress.
  3. Call us if you need help.

We understand that producing the needed documents and proving your financial stability may be difficult especially if you’re a start-up and not all lenders are willing to take the risk and provide that much needed loan.

However, for a business owner, a car loan could mean:

  • Being able to serve their customers well.
  • More efficiency and the ability to acquire new customers.
  • Expansion.

 

If no lender is willing to help, how would you then be able to grow and stabilize your business?

 

Scenario: Mike is self employed and recently started offering cleaning services. His first 3 months have been really good but his old van is limiting his ability to acquire new customers. Aside from that, since he only has 1 van, he is forced to turn down some customers because he simply cannot make time for them.

In this scenario, Mike needs a new van to increase his efficiency and possibly buy another one in order to serve more customers. The problem is, he does not have the track record to prove that he or his business is not a “risk"

Almost all business owners or self employed go through the same problem. Accountants, contractors, sales agents, real estate managers, brickmasons, carpenters, electricians, artists, and many more encounter difficulty when securing a car loan.

self-employed check list

General Requirements:

  • Identification
  • Bank statements
  • Tax returns
  • Expenses
  • Liabilities
  • ABN – If the vehicle will be used for business purposes.

Things you need to ask yourself before applying for a car loan.

Will the car be used for business purposes? If it is then you’ll need an ABN. If not, a personal loan or consumer loan option is also applicable to you.

How much money are you willing to pay upfront? If you want to improve your chances of getting approved for a car loan while self employed, pay as much deposit upfront.

How does your credit look like? If your credit is on the low side and you have negative reports on file, you may want to do something about them first before applying for a car loan. Defaults may affect your chances of getting approved.

Here are some tips to improve your credit rating

  • Pay your bills on time.
  • Keep your credit card debts at a minimum.
  • Check for inconsistencies and dispute them.

 

How does your loan payment history look like? If you have a mortgage payment or an outstanding loan and you are a good payer, your chances of getting a car loan approved while self employed sky rockets.

self-employed check list

Car Loan for Self Employed: Your Options

 

Contrary to what you might think, you do have some options.

 

Chattel Mortgage – If the car will be used for business purposes, you can apply for a chattel mortgage. You, the business owner, take ownership of the vehicle after it is purchased and the lender ties a loan onto it. The car then serves as a security for the loan and can be repossessed in case you miss payments.

Benefits

  • Low interest rate.
  • 12months to 7-year loan term.
  • GST benefits.
  • Depreciation and interest rate are tax deductible.
  • You take ownership of the vehicle.

 

Hire Purchase – The same as chattel mortgage but the lender retains ownership of the vehicle until the end of the loan term

Benefits

  • Low equity.
  • Fixed/Low interest rate.
  • Tax and GST benefits.
  • Flexible payment terms.

 

Low Doc Car Loan – This is probably your best option especially if your business is new and do not have the financial statements to show. Not many lenders offer low doc car loans but, thankfully, some do. Many self employed are going this route to secure a car loan because it requires less documentation.

How does it work?

Instead of providing the usual requirements in order to prove your financials and ability to pay, the lender will use other means to determine your income. Like bank statements to determine your monthly income, existing contracts, etc…

Benefits

  • Less documentation.
  • Up to 7 years loan term.
  • No deposit option may be available.
  • Tax returns may not be required.

How to Get Started with Self Employed Car Loan

  1. Download the checklist.
  2. Go over the checklist so you know what you already have and what you still need.
  3. Call us at 1800277768

self-employed check list

There may be things that you need clarification and assistance on and our self employed car loan experts are always ready to help.

Topics: Car Loans

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