How to Get Car Finance When You’re Self-Employed

Applying for car finance when you’re self-employed can be a little trickier, but with the right steps and adequate finances, you can successfully qualify for the loan you need. Below, we investigate how car finance works when you’re self-employed and how you can increase your chances of successfully applying.

Does being self-employed affect getting car finance?

Being self-employed can make it a little more complicated to get car finance, but it’s by no means impossible. Some lenders may view a self-employed person as being at higher risk than other employed people, as your income may be less steady. However, if you can prove you have a regular income that meets the requirements to repay the car finance payments, there’s no reason why you shouldn’t be able to successfully apply for a loan.

What will I need to get car finance if I’m self-employed?

When you’re self-employed and apply for car finance, you’ll typically need to provide more documents than other employed people This is because other employed people will be able to prove their regular income with payslips, however, you will need to use an alternative method.

Generally, lenders will ask self-employed people for bank statements covering at least three months. This will give them a good idea of your income so they can assess whether or not you will be able to make the repayments.

They may also ask for your trading accounts, to prove business solvency. In the past, lenders have asked for three years of accounts, but recently this has reduced to just two or even one years.

How do I successfully get car finance as a self-employed person?

There are a few ways you can improve your chances to successfully apply for car finance if you’re self-employed.

Improve your credit score

A good credit score is one of the best ways to improve your chances of qualifying for car finance. Whilst there are some lenders who provide bad credit car finance, based on your current situation rather than your past finances, to get the best interest rates usually requires a good score.

There are many ways to improve your credit score. You should make sure you’re on the electoral roll, as this is a simple way of improving your credit score. You could also work to pay off old debt before you apply for more credit. You can also review your credit report to ensure all the information is up-to-date. If you have had past associations with people who have a bad credit score, for example, you had a joint account with someone who you’re no longer associated with, you can update the report so you’re not connected.

You can find out more information about your credit score in our article Why is My Credit Score Important When Buying a Car.

Get your finances in order

Getting your finances in order ahead of applying for car finances can improve your chances of a successful application. This will include reducing unnecessary spending – so if you have any subscriptions that you’re not using, now would be the time to cancel them. You’ll want your bank statements to show your finances in the best light, which will mean proving that you have the necessary funds to comfortably make the repayments.

Use a guarantor

A guarantor can be a good way of securing car finance as a self-employed person. A guarantor will sign an agreement stating that they will be able to pay your car finance if you aren’t able to for any reason. This means lower risk for the lender, so they’re more likely to approve a loan.

Your guarantor will usually be a friend or family member who will be happy to make this kind of commitment for you. They should have a good credit score themselves, as well as a steady income and sufficient finances to cover repayments in the event that they need to.

Make a large deposit

Putting down a larger deposit can make your application more attractive to lenders as you’ll need to borrow a smaller amount, meaning there is less risk. If you have the means, you should aim to make as big a deposit as possible. This will make your monthly repayments lower and often means you’ll be able to access lower interest rates, so you’ll pay less overall.

Be realistic

When applying for car finance, you should be realistic about what you can afford to borrow. You should be able to comfortably make the repayments over the entire loan period. You should consider possible fluctuations in your income, such as seasonal peaks and troughs, and make sure you account for them when you calculate how much you can afford.

You’re more likely to be successful in your car finance application if you can prove that you will be able to make the repayments long term, so applying for the right amount is key to this.

Looking for car finance?

GetCarFinanceHere can find you the best car finance deals, including for self-employed people. Our expert team will find car finance options from our network of lenders and provide guidance throughout the process. We can find bad credit car finance for those with poor credit scores, looking at your current finances to assess the affordability.

You can apply for car finance online or contact us for more information.