How to Get Car Finance if You’re Self-Employed

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There are millions of people in the UK who are self-employed, many of whom have been, or are, in need of car finance. If you’re one of them, and you’re wondering how hard it might be to arrange finance on a car, then read our helpful guide to find out.

Why do self-employed people struggle to arrange car finance?

Lenders find self-employed people more challenging than employed people to assess. If you’re self-employed, you could be in any business earning any level of income. Incomes can go up and down, making you a bit riskier for a lender. If you haven’t been in business very long, then lenders may feel that you’re not established enough to have a regular income.   

How can I get car finance if I’m self-employed?

At motor finance 4u, we ask for some paperwork from you to prove to lenders that you can afford car finance. This is something that you’ll find is similar wherever you apply for car finance, as affordability regulations have tightened.

You need:

• Proof of income for the last three months.
• Address history for past three years. You must be a UK resident of at least three years to apply for car finance.
• Employment history.

Credit limit is based on a provable income. We cannot accept cash in hand as a provable income.

If you can’t provide proof of income, then you may be able to use a guarantor.

Is car finance the best route for me?

There are a number of routes to go down if you want to purchase a car, with finance being just one of them. Car finance is one of the most popular ways, however, and can be one of the cheapest if you’ve got a good credit rating.

The reasons why a lender might be cautious about lending to you are probably the same reasons that you should be cautious about borrowing. However, there are a number of things that you can do to make it less of a risk. For instance, if you have a big deposit, emergency savings and have insurance policies covering your health, your house and more, then you’ll have a pretty good back up plan.   

Am I guaranteed car finance?

No one can guarantee car finance, but we promise to look at every application individually. Rather than using a computer to instantly approve or deny, we have people looking at your application. We work with a number of different lenders, who understand that everyone has different circumstances, and our advisers work hard to match you with a sympathetic lender.  

What if I have a bad credit rating too?

It may be more difficult to arrange car finance if you are self-employed and you have a bad credit rating, but it is possible, and we work hard to make your car finance application a successful one.    

Tips for giving yourself the best chance of arranging car finance successfully

Keep your accounts up to date. If you don’t have to time to do this properly, then consider using a reputable, registered accountant for this purpose.

Keep tax returns, bank statements and any other proof of verifiable income.

Work on building a good credit score. There are lots of things that you can do to improve your credit score, but they are trickier when you’re self-employed. For example, don’t exceed your credit limits and pay your bills on time.  

Build emergency savings. Having cash saved is important for your own peace of mind, not only in general, but particularly when borrowing credit. It will mean that you know that you have a safety net in case you can’t make your payments.

Build a big deposit. One of the most effective ways making a lender see that you’re not a risk is by having a solid lump sum upfront. 

If you use your car for business purposes, you may also be able to claim for motoring expenses. HMRC says: “If a vehicle is used for both business and private purposes then the capital allowances and the total running expenses will be split in proportion to the business and private mileage. You will need to keep records of your total mileage and the number of miles travelled on business to calculate the correct split.” You can find more information on this here.

If you’re interested in applying for car finance with us, then please head through to our car finance calculator.