Self-Employed Before Financing a Car

Self Employed Car Loan Guide

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Self-Employed Car Loans

If you've recently become self-employed, you can get a car loan from day one depending on:

  • Whether you have experience in the role
  • Any contract in place
  • Accountant forecasted financials

Talking to a car loan broker will allow you to work out when the best time for you to apply for a self-employed car loan is, which lenders will accept your application, and what documentation you'll need to provide.

How long do you need to be self-employed before getting a car loan?

The answer to this question is really 'it depends'. In some situations, like if you have a contract to provide a service, or you're working for the same employer you'd previously worked for as a PAYG employee, you may be able to get a car loan from day one.

As a general rule, if you're working in an industry where you can demonstrate your skills and experience, you'll be approved for a car loan sooner than if you're entering a new industry with an innovative idea.

Understanding how the lenders will assess your car loan application will help you to determine whether you can apply for the car loan right away, or whether you should wait a little longer to build traction in your new business.

Self-employed car loan requirements

Each lender has different requirements to set up a car loan, but there are some basic principles that will apply. As a general guide, you can be sure that you will need to show:

  1. Who you are - usually using ID verification and your residential history.
  2. How you will make the car loan payments.
    This means evidence of a certain income. Documents the lenders want can include:
    • BAS Statements
    • Accountant forecasts
    • Bank statements over 3 to 6 months
    • Contract of employment
  3. Your credit score - this determines the risk to the lender too.

You'll also need an idea of the car that you need to buy.

Self-declared income

Some lenders will allow you to sign a self-declaration of income. Usually, to do this, you'll need to have been running your business for twelve months under a registered ABN, and you'll need to be registered for GST too.

ABN & GST registration

When you are self-employed you will need to have a registered Australian Business Number (ABN) before you apply for car finance.

This is an 11-digit number that allows you to charge for goods and services, pay tax and register for GST. Not all businesses need to be GST-registered, it depends on your annual turnover.

It's not a bad idea to register when you get your ABN though, as it makes it easier when you apply for finance, need to employ other people or if your turnover passes the $75,000 or $150,000 (for non-profit) threshold.

Some forms of employment, like driving for Uber or owning a franchise, require you to have an ABN and GST registration.

Start-up car loans

Due to a growing demand for independence at work, more people in Australia are branching out and choosing to be self-employed rather than PAYG under someone else's enterprise. This has increased the need for low doc and entrepreneurial car loans.

You don't need to leverage your mortgage to get a Self-Employed Car Loan.

Some online and alternative lenders have appeared on the market offering loans that the big banks would never consider. To assess your application, they'll look at your business potential and the quality of your idea.

The days when you had to mortgage your house to raise money for your business idea are in the past now that you can access these alternative financiers and peer-to-peer lenders.

Case studies

Case study 1: Jack's a recently self-employed contractor

Jack is a former banker who's making a career and lifestyle change. He has a three-year contract to deliver parcels for Australia Post which starts in less than a week.

The only issue is that he'll need a bigger car to do the delivery run in.

Rather than using his savings to buy the car, he decides to keep the money in his mortgage offset account and apply for a self-employed car loan.

Jack speaks to a car finance specialist, and pretty soon he's pre-approved for a $35,000 loan based on his credit history and the contract with Australia Post.

Case study 2: Gemma's start-up loan

Gemma started a vegan burger food truck business nearly a year ago, and she's been incredibly successful. She's looking to upgrade the 2001 Toyota Rav4 she uses to tow the food van so she can attend events interstate.

Gemma has a registered ABN and is also registered for GST.

With her Tax Return showing the income from her full-time PAYG job, BAS statements and a forecast income projection from her accountant, she's able to get a car loan to buy a 2015 Land Rover Discovery which will be able to handle the growing weight of the trailer.

Are you ready to apply?

If you need a self-employed car loan and you think you're ready, it's a good idea to talk to your accountant, and then to a car loan specialist to help you to explore a range of lender options that your bank can't offer.

More free time or more income can't hurt, so what do you have to lose? Find out what your options are and plan your next business move now.

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