If you're not a regular W-2 employee, it's still possible to get approved for an auto loan. You can buy a car while being self-employed as long as you meet the lender's income requirements and provide proof of income in the form of tax returns instead of the typical paycheck stubs.
Car Loan Income and Employment Requirements
Subprime lenders ask that you meet their minimum income requirements before extending approval, and some only accept borrowers with W-2 income. This means that it may be more difficult finding one that's willing to work with you if you're self-employed.
If you do find one, you still may get turned down if you don’t make enough income. Although the minimum amount varies, most subprime lenders require self-employed individuals to make at least $1,500 to $2,000 a month in net income after expenses.
Being self-employed, you either have your own business or you work as an independent contractor for others. Either way, you know that you pay your income taxes quarterly instead of every week or two weeks, and, if you're an independent contractor, you receive a 1099 form every year from your employer(s).
For providing proof of income while self-employed, subprime lenders are going to look at Schedule C of your income tax form, where they use your net income after business deductions as your gross (pre-tax) income. Keep in mind that they may ask to see multiple years of tax returns as well as bank statements to serve as proof of income.
Having a Co-Borrower Can Help
If income is an issue for you, there are other ways you can get approved for an auto loan. To do this, you typically need to have a co-borrower. A co-borrower is someone, usually a spouse, who signs a car loan with you and becomes an equal owner of the vehicle.
What makes having a co-borrower great is that you can combine incomes if they're your spouse. If your co-borrower has W-2 income, you might even qualify for better loan terms. To read up about co-borrowers and their role, click here.
Looking for a Dealer to Work With?
If you’re ready to take the next step and get the auto financing you need, we’re here to help. Auto Credit Express matches car buyers to local dealerships that have the lending resources to assist people with bad credit. Don’t wait for an opportunity to arise, get started today by filling our simple and free auto loan request form.