Income & Employment

When it comes to auto loans, your income plays a big part in the approval process. Lenders will consider both the type and amount of your income to determine whether or not your approved and for how much.

Your employment is important in getting an auto loan for a few reasons. When applying for auto financing, it all comes down to risk in the eyes of a lender. In order to get approved, a lender has to be confident that you’ll have the ability to repay the loan in reasonable terms.

If the type of employment or income source that you have or the amount that you receive makes you a higher risk borrower, you may have a challenging time getting approved for financing with a dealership.

Getting preapproved is a great step to take to discuss any impact of your employment with a dealership’s finance manager.

There are several different types of income or employment that people can have:

• Employee (W2)
• Self-Employed (1099)
• Fixed Incomes
• Cash Income
• Temporary/Staffing Service

The important thing to remember is that you’ll need to be able to prove your income and provide documentation to the lender in order to get approved. This is typically done through tax returns, pay stubs, and bank statements.

This can make cash incomes or temporary employment more difficult, especially with franchise or independent dealerships. In these cases, you may have a better chance getting approved at dealerships that offer in-house financing, like buy-here-pay-here car lots.

The amount of income you need will of course depend on how much you’re attempting to finance, the loan-to-value (LTV) ratio of the car, and the dealership you’re financing through.

Typically, car buyers that make less than $1500 per month (pre-tax), will have a harder time getting approved and may need to explore lower income financing options – especially if they have less than perfect credit as well. However, it is not impossible to still get financed with a lower income.