Configuring Auto Financing for the Self-Employed

Self-employment shouldn’t prevent potential customers from purchasing a vehicle through your dealership. By adjusting your financing process slightly, you can make financing a car accessible to individuals with non-traditional forms of employment, expanding your pool of potential customers. 

Here are a few tips to help you provide auto financing for self-employed customers.

Seek Alternative Proof of Income 

Customers without traditional full-time employment may not have pay stubs that they can present to you as proof of income. However, you can seek several other documents to better understand a potential customer’s employment and typical income.

Considering allowing these alternative documents when a self-employed buyer applies for a car loan:

• Bank statements
• Tax returns
• Contracts and invoices
• Business statements

If you need to know a buyer’s income from the previous year, ask for their 1099 or Schedule C tax return. If you just want to know how much income the customer generates monthly, consider accepting bank statements showing the money transferred into their accounts. 

Review Credit History

Income is only one factor impacting a potential customer’s ability to repay a loan. You should also review their credit history to understand their past financial activity. 

A good credit score indicates that a potential buyer has acted responsibly with past loans. They have made on-time payments, suggesting they have a reliable monthly income to pay their bills. 

Of course, past financial activity doesn’t always predict future habits. However, you can use a buyer’s credit history to provide an overall picture of their finances. 

Suggest a Co-Signer or References

If you cannot gain enough confidence through a potential buyer’s income statements and credit score, suggest measures they can take to improve their eligibility for self-employed car loans. For example, perhaps they can add a co-signer to the loan. Doing so gives you another person to fall back on should the original buyer default on their loan. 

When considering the parameters of auto financing for self-employed customers, you might ask the potential buyer for loan references from past lenders, business clients, or family members. However, remember that seeking references will only prolong the lending process and could drive a potential customer away from your dealership altogether. 

Partner With Flexible Lenders

As an auto dealership, you likely work with outside lenders to give potential customers financing opportunities. You don’t get to decide the eligibility requirements these lenders put in place. However, working with flexible lenders could help you extend financing opportunities to non-traditional buyers, such as self-employed ones. 

Look for lenders who specifically work with borrowers who have limited credit history or less-than-ideal finances. These lenders may be more willing to extend loans than ones with stricter income requirements. They typically charge higher interest rates or put other safeguards to prevent risk when self-employed individuals apply for an auto loan. 

By working with flexible lenders, you increase your overall loan approval rate and expand your customer base to those who may not qualify for loans at other dealerships. 

Work With 1803 Capital and Improve Borrower Eligibility 

At 1803 Capital, we specialize in providing financing to dealers like you who want to offer auto loans to a wider population. Whether you want to provide auto financing for self-employed customers or those with limited credit history, we can facilitate the accessible loan options your customers need.



Contact us today at (866) 890-2415 for more information.