Self-employed car finance: 6 aspects you need to know

self-employed car finance

Self-employment is about consistency, hard work, and constant growth to achieve the next momentum- a broad business setup. If you have achieved that milestone and want to grab on to the next of buying a car on finance, you should know certain things.

You may be seeking one to ensure smooth business operations. Getting car finance as a self-employed is not easy. It is daunting, from finding the right vehicle to revealing consistent income proof and getting approval.

Thus, the blog states the obstacles and solutions to ensure a smooth route toward car finance for self-employed approval. It lists nearly everything you should know to get car finance.

What do I Need to know before approaching car finance?

Whether you have previously applied for car finance and got rejected or applied for the first time, there are certain things you should know before applying. It would not only help you qualify but get low-interest rates and costs as well.

Here are some aspects that may benefit both fine and bad credit-seeking self-employed car finance solutions:

1) What is the probability of getting car finance as a freelancer/ self-employed?

You may get car finance as a self-employed by revealing consistent business growth and revenue figures. Provide sufficient proof of the purposes you would like to use the car for.  

Generally, you can qualify for car finance as a self-employed if you use the car only for business purposes like- business meetings, transferring goods, or official trips. Apart from this, you should own a separate business account and have a registered business with Company House to get the quote.

2) Who may qualify for self-employed car finance?

Individuals must abide by a standard eligibility criterion to get car finance for self-employed:

  • You should be operating for atleast 3 years as a self-employed in the country
  • You should have a static address for 3 years
  • Must have sufficient proof of business consistency without any gaps for atleast 2 years
  • Must have every transaction listed in accounts. Cash dealing does not count as legal income.
  • What documents do you need to get instant car finance for self-employed approval?

When you apply for car finance as a self-employed, you would have to provide documents like- Company registration proof, trading accounts, tax returns, self-assessments filed, address proof, driving license, bank statements, and proof of incomings and outgoings.

If you do not have sufficient revenue or good credit history, you may require to provide additional proof. It can be a guarantor or your business partner. You can provide his personal and business details – credit score and equity he shares in the company. It may help you qualify for low-interest rates.

  • Can I claim tax deductions on car finance payments?

If you operate legally and fully as self-employed, you may claim tax deductions on your payments. Deductions may vary as per the intended usage of the car. According to HMRC, if you purchase a car for business purposes like- arranging meetings,  you may be able to claim the vehicle costs.

Alternatively, if you apply for car finance as a self-employed for personal use, you would not be able to claim any deductions here. It is because you may not claim tax deductions on car finance for personal expenses with business details and revenue operations.

However, if you want to claim the tax deductions for both personal and business usage, you may get deductions only on the part you use the car for business purposes.

 For example, if you use 60% of the car for business trips and other purposes, you may claim 60% deductions on car finance payments.  To ensure you get the accurate and expected tax deductions, create a sheet including times you use the car for business purposes. Note down the mileage and time you use the car for business purposes in a day.

5) How to get bad credit car finance as self-employed?

Though getting car finance on bad credit as a self-employed is challenging. There are a few things you can do to qualify:

  • Provide an upfront deposit or finance with half cost of the car
  • Check if you can get someone to guarantee the payments
  • Provide additional proof of the new projects or pending invoices
  • Pay off some previous debts or consolidate to get car finance
  • Borrow a lower amount than what you want
  • Get on the electoral roll

6) What are the best car finance arrangements for the self-employed?

 As a self-employed, you may have unique goals for a car. You may want to purchase it by the end of the agreement, return it or trade it for a new one:

Here are some best ways to finance a car as a self-employed:

a) Personal Contract Purchase ( PCP)

A personal Contract Purchase is a car finance agreement that ensures some limits on mileage up to which you can drive the car. The good part is that the arrangement helps you – return the car, trade it for a new vehicle or car finance deal, or buy it outright with a balloon payment. It is ideal for self-employed with an inflexible budget. You can use a new or old car with easy and low monthly instalments and change to a new one more easily than Hire Purchase.

b) Hire Purchase ( HP)

Hire Purchase is an agreement in which you pay the deposit and the rest costs in easy monthly repayments for the loan term. Here the loan is secured against the car. It implies you cannot own the vehicle until you pay the sum by the end of the loan agreement. There is no balloon payment in Hire Purchase. It is ideal for self-employed businesses who want to own the car outright.

You may get any of these based on your potential to make payments or deposits. You may be responsible for maintenance costs on any of these agreements. If you lack sufficient cash to counter the repair now, loans for bad credit with no guarantor and no fees from a direct lender can help you get the deal done promptly. With no guarantor requirement, even with bad credit, it easily bridges the cash need. You can do so before invoice clearance and ensure a smooth drive.

Bottom line

These are some critical aspects to know before availing of car finance as a self-employed. A consistent revenue stream, paid taxes, separate business accounts, and deposits can help secure car finance easily. If you lack sufficient work and credit history, wait for some time. If you cannot, a guarantor can help you get the loan.

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