The gig economy is huge and growing larger by the day. Even before the pandemic shook everything up, people were leaving the 9-5 corporate life behind and forging their own way in the world.
This created a whole sector of the market who may not have been able to access car finance in the traditional way. What’s the landscape for freelancers and gig workers now? Can you get an auto loan if you work for yourself?
Yes you can.
Car loans for the self-employed
Canada has always been open to new ways of working and for shaking up old traditions. That’s why where are so many people in the country going it alone. From Uber drivers to Deliveroo riders, freelance photographers to self-employed contractors, there are thousands of self-employed people in Canada.
And that’s what you are. Self-employed. Whether you class yourself as a freelance, gig worker or something else, you’re self-employed.
As someone who is self-employed, you need to do three things to qualify for a car loan.
You need to:
- Be able to verify a steady income – As with any loan application, you will need to prove your income. You will often be asked for taxes or bank statements covering the last two or three years for this.
- Have a low debt to income ratio – Debt to income ratios are important factors in any loan application but they are even more so when you’re self-employed. You ideally need a ratio of less than 50% over the long term to be approved but there are always exceptions.
- Justify all your deductions – While lenders are not there to assess your taxes, they need to make sure you’re not overstating your income. As the self-employed can write off a lot of expenses to the business to save tax, you need to balance that with transparency and leaving enough net income to qualify for a loan.
Many of the lenders we have relationships with work with the self-employed. They understand that income can be sporadic and that you may have messier finances than someone who is employed.
As long as you can prove your income, pay your taxes and have the paperwork to prove it, you should qualify for a car loan.
If you’re a freelancer or gig worker, talk to one of our team who can walk you through the entire process.