There has been a dramatic increase in the number of Canadians that identify as self-employed. If you are self-employed and shopping for a new vehicle, we’ll provide you with all of the information you need to buy a car when self employed in Ontario.
Are you financially able to buy a car when self employed?
One of the biggest challenges that self-employed Canadians face is income instability. Running a business can be exciting, but if you do not pay close attention to your accounts receivable, your cash flow could slow down to a trickle. Even if your cash flow is steady, you will need to be in business for a minimum of 1 year and preferably two years.
As an entrepreneur, you may re-invest all of your income to grow this business; this lowers your total income and makes it harder to secure a car loan.
If you do not draw a salary, you will need to show prospective lenders your income statement and balance sheet.
How strong is your credit?
The majority of entrepreneurs use their personal credit cards to finance their businesses. While this is a convenient way to get things going, your credit score will take a hit if you carry too much debt. As a self-employed borrower, lenders are going to scrutinize your application more so than if you worked a conventional job.
A good credit score is anything over 680, you can access your credit score with apps like Credit Karma, but you should get your Equifax credit score. If your score is under 620, you must work on repairing your credit as soon as possible.
When do you need the new vehicle?
There is a shortage of new and used cars in Canada and around the world. If you need to buy a car when self employed right away, you will have to pay a premium, and you may not be able to get the car you actually want.
You may have more choices if you have some flexibility as carmakers work hard to catch up with global demand.
Will you be using the vehicle for work? If you are going to be using it for work, you will need to get commercial insurance which can be costly, so be sure to work that into your budget. You may feel overwhelmed with these requirements, but you can overcome them with the right professional advice.
Getting the right car buying advice
Entrepreneurs try to do everything on their own, but when buying a car, you will need to get expert advice from a local car dealership. The dealership has onsite credit experts who can help you secure the lowest interest rates on your vehicle purchase.
If you are buying a used car, the interest rates are higher, but the dealership will help keep them affordable.
Since we are on the topic of affordability, the dealership has cars in their inventory for all budgets but be sure to go for a test drive before making any buying decisions. If you made it to this point in our conversation, you will be able to buy a new vehicle without much hassle.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!
For any questions or concerns, please don’t hesitate to contact us here!