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What you need to know about self-employed car loans but were afraid to ask

Posted by on Sep 01, 2022 - Archived under Bad Credit Car Loan Tips

If you own your own business in Ontario and need a car loan, these tips will save you money.

Auto loan companies have started to make changes to their underwriting processes so that self-employed people can get loans, but you will still have to do some extra work before you can drive home in a new car.

How long have you worked for yourself?

In general, lenders want self-employed people to have been working for at least two years before they apply for a car loan.

This doesn’t mean you won’t be approved; it just makes things more complicated than they need to be.

If you haven’t been in business for at least two years, the lender will ask for your most recent income tax assessment, which you can print from the CRA.

Prepare to give your last year’s bank statements and any contracts you have with current customers along with your income tax assessment.

With these contracts and your bank statements, you’ll be able to show that your business is real and that your income is somewhat predictable.

So that they can figure out your maximum debt-to-income (DTI) ratio, lenders need to know how much money you will make each month.

If your DTI is more than forty (40%) percent, most lenders won’t give you a car loan.

Having a laser focus on your credit score

Once potential lenders can figure out how much money you make, they will look at your credit score.

For the best interest rates on a new car loan, you need a credit score of at least 700, but preferably higher. The higher your score, the less interest you will pay.

Most Canadians who work for themselves put their business costs on their own credit cards.

This is convenient, but it will make you use more of your credit than you should, which will hurt your credit score. This is why setting up a separate business account and doing all of your business through that account should be your top priority.

Even if you are self-employed and have good credit and a steady income, some car loan companies won’t give you a great deal.

You have choices, but you need to pay close attention to what these suggestions say.

Where in Ontario to get the best car loans for people who work for themselves

Your best bet is to go to a local car lot that works with people like you who are self-employed in Ontario.

The dealership will take the time to learn about your business so that they can choose the lenders who will offer you the best terms. Even though these extra steps might seem like a hassle, they will be worth it when you get to drive your new car.

Canada has a shortage of both new and used cars, so you’ll have to move quickly if you want to get the car you want at a price you can afford.

Now that you know how to get a car loan in Ontario if you are self-employed, you should call the dealership right away.

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!

Let’s get in touch! 

Dixie Auto Loans