Sep 07th, 2023
Car Loan Tips When You’re Self Employed
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Are you newly self-employed? Maybe you’re looking to expand your business.
Whatever it is, when it comes to getting a car loan, it can be quite daunting – especially if you’re self employed.
Often, people run into problems being self-employed, as banks are a little less lenient with offering loans. Typically, they require different forms of Proof of Income, rather than just your traditional payslip. So, we’ll run you through exactly what you need to consider when finding a car loan and how to manage things in the most seamless and stress free way…
Often, getting started is the most difficult thing. With plenty of hoops to jump through, it can feel like no one is on your side. At Rostron, we’re all about making the process as smooth as possible – we’ll be there each step of the way to make sure you get the best loan and the best service.
So, to kick things off, let’s look at exactly what you need to consider before diving into the loan process.
The first thing you need to consider is the PURPOSE of the vehicle:
- Will it be used solely for personal use? For example you run a business, but don’t need the car for normal business operations (E.G. Accountant, Digital Marketer).
- Will it be used half for business and half for personal use? For example if you’re a tradie and have a ute that you use for both work and general driving .
- Will it be used solely for business? For example if you own a business that uses a truck to deliver.
Ultimately, understanding the purpose of your vehicle purchase will allow you to jump into deciding what type of loan is your best option.
1. Consumer Car Loan
Traditional consumer car loans are generally the best option if you’re self employed and looking to purchase a car for Personal use.
When you take out a car loan, it’s secured to the car – so if anything goes wrong financially, the lender can take back the vehicle. Because of this, lenders are more confident in loaning out larger amounts of money, and offering low interest rates when compared to other options.
Because consumer loans are regulated by the National Consumer Credit Protection Act (NCCPA), there is more security associated with the loan, and thus less risk for the lender.
A chattel mortgage is a great option if you’re self-employed and will be using your vehicle for business at least 50% of the time.
This type of loan is very similar to a typical consumer car loan in the sense that they are secured to the vehicle, however, they are tied to the business rather than you as an individual. This is a great thing as it allows you to access unique tax deductions associated with having a business vehicle, including on interest and depreciation. With full documentation loans the lender will require the latest years tax returns and company financials.
A low doc loan is another great option for self-employed customers as they require less financial information than normal loans.
Low docs loans are designed for people whose income has increased since their last taxation return. Although a current tax statement is not required, interim financials, such as BAS, bank statement or even a letter from your accountant may be required to substantiate income.
Lenders see these as slightly higher-risk loans, and thus they tend to charge a higher interest rate. That being said, as there are fewer documents required, lenders are able to review and approve these types of loans swiftly and find you the cheapest deals on the market.
Some lenders also offer a no doc option where they require little to no financial documentation or proof on income to secure finance.
4. Business Loan
Last but not least, business loans are great options if you’re purchasing a car solely for business. They are the perfect financing solution for those looking for cashflow for their business. They are similar to a Chattel Mortgage from a deductions point of view, however, there is increased flexibility regarding terms and whether the loan is secured or not.
So, by taking into consideration the purpose of your vehicle, it will make it much more straightforward to decide on what type of loan works best for you and your self-employed situation.
Interested in buying yourself a car for you or your business?
At Rostron Finance, when it comes to car loans, we’ve got the experience and knowledge to get you the best deal – no matter your circumstances.
Feel free to give Rostron Finance a call on 1300 70 70 39 – we’d love to help!
