If you’re in the market for a car, there are many ways in which your car finance deal may be rejected. There are a number of reasons why you may be declined car finance and most drivers assume it may be down to a low credit history. However, each individual lender has their own criteria which you will need to meet to be eligible for car finance. One factor that many lenders need to know is whether you are employed or not. However, more specialist lenders have joined the car finance market and could even offer you a finance deal if you don’t have a job! The guide below looks at why it’s important to have an income for car finance and how different employment status’ affect your chances of car finance approval.
Who can get approved for car finance?
It’s hard for a lender to promise you a car finance deal if they don’t know anything about you. If you have a low credit score, you may be looking for guaranteed car finance for bad credit but no lender can ever guarantee car finance and it would be irresponsible to lend to anyone who can’t afford it. Similarly, to your credit score, your affordability is also important too. Some lenders may also require you to be over 18 and under 70 years old, have a full UK license or have loved in the UK for 3+ years. It’s worth checking the lenders criteria first before you start applying for finance to increase your chances of an approval.
Why does employment status matter for car finance?
When you apply for a car finance deal, you are borrowing money or borrowing an amount that is secured against a vehicle of your choice. This means the lender loses money until you have paid back your car finance deal. Due to this, it’s really important that lenders know how you are going to pay back your finance and with what money. If lenders gave money to someone who couldn’t pay it back, it would be pointless and unethical. Lenders use an employment check or an affordability check to see your income and expenditure and work out how much you could comfortably afford for finance each month. They usually do this by requesting bank statement or payslips to verify your earnings.
Full time employment
From a lenders point of view, the most favourable employment status is being full time employed. A full-time job usually indicates a good wage and a regular, fixed income. This means the lender knows you can afford to pay your car finance deal each month, on time and in full. Some lenders may have requirements for a minimum income amount or a minimum job tenure though so it’s worth checking before you star making applications.
Part time employment
It can be possible to get a car finance deal with a part time job if your income matches the requirement of the lender. Many Applicants could also use a mixture of par time work and benefit income to help prop up their applications. However, if you’re failing to get approved with a part time job, you could consider saving for a down payment or fixing a bad credit score to help improve your chances of acceptance.
Benefit income
If you’re currently not in any form of work, you may receive benefit income. Benefit income in the UK is used to support people who can’t work due to a number of reasons. It’s possible to get approved for car leasing on benefits or take out finance when you choose the right lender. Even though many people on benefits don’t have an employment status, they can usually get a car on finance as benefit income is fixed and will be paid at the same time each month. This allows lenders to work out how much you could afford to spend on a car. It’s worth noting that there can be a minimum benefit income needed though.
Self-employed workers
When you’re a self-employed worker, it can be harder to prove your affordability, especially if you get paid cash in hand. However, being self-employed shouldn’t mean that you can get approved for car finance. If you have a regular income but usually get paid in cash, it can be a good idea to pay your earnings into a UK bank account to prove your affordability and increase your chances of getting a car.