How to Get a Car Loan When You're Self-Employed

Discover what you need to prepare beforehand to help yourself get approved.

Elliot Rieth | 

Aug 4, 2023 | 3 min read

Adobe

Perhaps you chose self-employment for career independence and now you're looking to make your next move: securing a car loan while self employed. Unfortunately, the car-buying process can be a little more complicated when you don't get steady paychecks or a W-2.

With an estimated 58 million Americans working for themselves, it can be important to understand how a car loan for self-employed individuals is different (and the same) as it is for others. Bringing the right documents required for self employed car loans to the dealership, understanding your financial situation, and proving your trustworthiness will all be factors in securing support for your upcoming vehicle purchase. 

What to Bring When Applying for a Self-Employed Car Loan

Because you can't provide W-2s, you will generally need to come prepared with documentation that proves your viability as a loan candidate.

The most important information you will need to provide is proof of income. Bring documentation that shows evidence of a steady income that can be used to pay back a car loan. Documents such as bank statements, deposit forms, and bank slips show a trail of financial transactions and help support your loan candidacy.

To further provide proof of financial stability, it might be beneficial for you to bring a variety of tax forms — like your 1040, Schedule C, Schedule SE, or 1099 — from the last few years. If you don't have these forms on hand, request your tax transcripts from the IRS to provide a full breakdown of your taxable income. 

How to Establish Reliability

While your financial stability is the key consideration many lenders will use to approve or deny your car loan application, it's also crucial for them to know you're reliable.

Many lenders may ask for proof of residence to establish you have a long-term address where they can reach you. Not only does this prove consistency, but documents like utility bills or mortgage payment statements will help to establish both your residence and your financial responsibility.

Depending on the lender, you may also be asked to provide personal references. Proactively bringing a list of references to your application meeting will show your lender that you are transparent and trustworthy, reducing their concerns over approving your self-employed car loan. 

Credit Is Still Key

A consistent factor in the success of every loan application, self-employed or not, is having good credit. Regardless of your employment status, your ability to pay back your debts is crucial in a lender's decision to give you its money.

Before you apply for a car loan, make sure you know your credit score, as well as what makes a good credit score. Also consider calculating your debt-to-income ratio, as lenders may use this as a factor in determining your creditworthiness. 

Bring a Co-Signer to Support Your Self-Employed Car Loan

If you believe your financial situation may lead to issues securing a self-employed car loan, consider asking a friend or family member to co-sign for you. Having a co-signer on your auto loan adds reassurance to your lender that they will get their money back.

By adding a co-signer, you can mitigate their doubt about your ability to pay back your auto loan and, as a result, more easily secure financing. However, keep in mind that co-signers are equally responsible for your monthly payments. This means any missed or late payments will directly affect your co-signer's credit as well — so be sure to stay on top of your loan.

Getting a car loan for self-employed buyers isn't impossible, but it will take more work to secure one from a traditional lender. Preparing beforehand and keeping your finances organized will help you make the right first impression and increase your chances of approval.

Elliot Rieth

Elliot Rieth is a writer who was born and raised in Michigan, the center of the American automotive industry. With a background in the industry that spans from sales to digital marketing, Elliot has years of experience working directly with dealers and OEMs to create digital content and educate potential customers. When Elliot isn’t writing about horsepower or EVs, he can be found with his two greyhounds enjoying a new book or record.