Financing a car is one of the most popular ways of getting behind the wheel of a new vehicle, especially for drivers looking for flexible self-employed car finance in the UK., and it’s a service that we’re proud to offer. However, to finance a car when you’re self-employed can introduce a few hurdles, making it a little trickier than if a company employs you.
In this article, we’re going to be clearing up some of the confusion surrounding car finance when you’re self-employed to help make the whole process easier.
Self-Employed Car Finance Explained
As with nearly all types of financing agreements, when taking out finance on a car, you’ll need to prove to lenders that you can afford to make the monthly payments. When a finance applicant is employed by a company, there’s more of a ‘safety net’ for lenders, as they know that the driver will be getting a steady income.
However, It can be harder to prove your income when applying for self-employed car finance, especially for freelancers, contractors and sole traders., though having all of the right information to hand can help.
What if I have bad credit car finance?
This is an area where things might prove tricky. If you’ve got bad credit, then lenders may turn down your self-employed car finance application. However, if you check beforehand, then you can take some measures to improve it. Even applying for the electoral roll or paying off old loans to firm up your finances can help to improve your credit score and improve your chances of securing bad credit car finance. Remember, if you have any questions that you’d like to ask, then feel free to get in touch with a member of the Prestige Cars Kent team and they’ll be happy to help.
Self-Employed Car Finance Documents
There’s a little more documentation required for those who are self-employed to finance a car. For starters, you’ll need proof of income, with most lenders requiring up to three months’ worth of bank statements as a way of showing what you earn.
You may also be asked to show your trading accounts so that you can certify that you’ll be able to pay off the loan and improve your chances of car finance approval.
Consider putting down a larger deposit
You may want to think about putting down a larger deposit on a car when getting finance as a way of improving your car finance approval chances. By placing a larger deposit, you’re effectively making the amount of money that you’re borrowing smaller, so lenders are more likely to agree to an agreement because there is less risk.
By doing this, you’ll also lower your monthly payments and make them easier to manage overall.
Best Self-Employed Finance Options
The most common type of finance used on cars is Personal Contract Purchase (PCP finance). With this, you’ll pay an initial deposit, followed by monthly instalments over a fixed period, typically between 12 and 60 months. Towards the end of that period, you’ll be offered the chance to pay off the remaining portion of the loan, known as a ‘balloon payment’ - or return the vehicle to the vendor and walk away.
PCP finance for self-employed drivers can be a popular option because it often offers lower monthly payments and flexible end-of-contract choices.
You can also take out a Hire Purchase (HP) agreement. With this method, you’ll also pay a deposit, but your monthly payments will be higher as you’ll be paying off the overall value of the vehicle. At the end of the agreement, you’ll own the vehicle outright and be free to do with it what you like.
There’s no reason why car finance needs to be confusing, and here at Prestige Cars Kent we’re happy to help. Get in touch today to find out more about the self-employed car finance options we’re able to offer, or take a look at our current range of cars to see which one could work for you.
