Being your own boss is an idea that appeals to everyone. Not having to worry about keeping anyone happy but yourself, and not working hard to make money for someone else’s pocket, it’s something that we’ve all at least thought about in our working lives.
But, if you are self-employed, then it can seem like some things aren’t as accessible to you. In particular, it can feel like finance is much more difficult when you work for yourself. As if you have to work harder to prove you’re worth enough for a finance package.
We know how confusing things can be when you’re self-employed, so we’ve put together a quick guide on self-employed car finance and how it all works.
The good news is that of course you can get a car finance deal if you’re self-employed. As long as you can afford the payments and that your credit rating doesn’t prohibit you from getting the right package, then you will be able to get a car finance package.
The big thing you need to do is prove your income. A finance provider won’t lend money to you if they think you won’t be able to afford the repayments. So you’ll need to have evidence of the money you’re earning. This is no different than what those who are employed have to do, but instead of a payslip from your work, you’ll need to submit bank statements. How far back you will have to show depends on the lender, but it generally varies from 3-6 months.
Aside from this proof of income, you’ll need proof of address and proof of identity – normally your driving licence but you can also use your passport.
This will depend on the finance package you’ve taken out. In most cases, there are no restrictions on using your car for your work. But you’ll need to bear in mind the annual mileage limits and condition requirements that can be put in place on certain finance products, like personal contract purchase and lease purchase.
It’s worth being upfront about your plans for the car when you apply for the finance package. There may be an advantage to declaring it as a business expense, and you may be able to claim the car finance payments as a tax deductible. But you should investigate this with your finance provider.
Taking out a car finance package will affect your credit rating. But this can be both positive and negative. If you don’t make your monthly repayments and end up defaulting on the package, then this will negatively affect your credit score.
But if you’ve paid off your finance package on time and without any issues, then this will positively affect your credit rating. Finance providers want to know how trustworthy you are as a potential customer. Demonstrating you can take out a finance package and pay it off is a great way to show that.