Securing self employed car finance can be a challenging endeavour. Unlike traditional employees, self-employed individuals face distinctive challenges when applying for auto financing. In this comprehensive guide, we’ll explore the array of options available, the minimum requirements, potential restrictions, and key considerations for self-employed borrowers.
Self Employed Car Finance: Your Finance Options
First crucial step towards obtaining self employed car finance is to determine the primary purpose of the vehicle. Whether it is for business or personal use will significantly influence the available finance options.
Business Use: For vehicles used more than 50% for business purposes, options such as Chattel Mortgages and commercial hire purchase agreements are popular choices. These finance options are not subject to regulation by the National Consumer Credit Protection Act (NCCPA), which streamlines the application process.
Personal Use: If the car primarily serves personal purposes, self-employed borrowers may opt for a Consumer Finance, which falls under the NCCPA’s regulatory oversight. It’s essential to be aware that this oversight adds complexity to the finance application.
Minimum Requirements for Self Employed Car Finance Applicants
self employed car finance must meet certain minimum requirements to secure car finance successfully. These requirements typically include providing proof of income, which can be demonstrated through tax returns and financial statements.
For regulated consumer finance, comprehensive income documentation is usually required, regardless of employment status. Those with corporate or trust structures may need to provide additional documentation, such as business financial statements.
Potential Car Loan Restrictions
The specific restrictions on self employed car finance borrowers can vary depending on the lender and the type of finance. Here are some common restrictions to be aware of:
Extra Repayments: Some finance options may limit the ability to make extra repayments or impose maximum limits. Borrowers should carefully review these terms to avoid unexpected fees or costs.
Low Doc Finance: These finance options, favoured by self-employed individuals, may come with greater limitations. Borrowers might find that they can only use the finance amount for vehicle purchases and are restricted from making additional repayments.
Key Considerations Before Applying
Before applying for self employed car finance, individuals should consider the following:
Affordability: Determine if you can comfortably afford the finance, factoring in your business income and personal expenses.
Early Repayment: If you plan to make extra repayments or pay off the finance early, check the finance terms to ensure the lender allows these options.
Business Impact: If the car is for business purposes, understand the potential risk to your business assets in case of finance default.
Securing self employed car finance necessitates a thoughtful analysis of your unique circumstances and finance options. Understanding the purpose of the vehicle, meeting minimum requirements, and being aware of potential restrictions will enable you to navigate the finance application process successfully. Make informed decisions to ensure that your car finance aligns with your financial situation and goals.
