If you work under contract, you might not have the same documentation that most people do regarding your employment and income. This can make financing a car as a self employed person seem more difficult. However, if you are ready and have the necessary knowledge, you can still be approved for a car loan as long as you satisfy the lender’s requirements.
Although working under contract has many benefits, such as increased freedom and flexibility, there are drawbacks, particularly when it comes to financing a car. In contrast to regular employees who receive W-2 forms and paychecks, 1099 workers are regarded as independent contractors and do not possess the same documentation proving their income and employment. This may discourage lenders from approving auto loans, but it doesn’t mean it’s not feasible.
Can I Buy a Car if I’m Self-Employed?
Absolutely! While you might be viewed as a slightly riskier borrower, financing a car as a 1099 worker is definitely achievable. Lenders have varying requirements, but generally, you should be able to get a car loan if you meet the following criteria:
- Monthly income: Have a consistent monthly income of at least $1,500 before taxes.
- Down payment: Make a down payment of at least $1,000 or 10% of the vehicle’s selling price.
- Credit score: Maintain a good credit score and a healthy debt-to-income ratio to secure a loan with a favorable interest rate.
Proving Your Income as a 1099 Worker
You won’t have traditional pay stubs, so you’ll need to give lenders other documentation proving your income. Here are some documents you can use:
- Tax Return: Your annual tax return (Form 1040) is the most reliable way to demonstrate consistent income.
- 1099 Forms: If you don’t have your tax return readily available, you can show your 1099 forms, which are sent to you yearly by companies that have paid you over $600.
- Bank Statements: If you don’t have a 1099 form, providing bank statements is a viable option. Ensure you have separate accounts for business and personal expenses for easier verification.
- Pay Stub: You can create a pay stub for yourself, including details like the company name, job title, hours worked, gross pay, deductions (federal and state taxes, social security, and Medicare), and net pay.
- Employment Verification Letters: If you have a long-standing relationship with a particular employer, request an employment verification letter confirming your income and work history.
Tips for Getting the Best Car Loan Rates as a 1099 Worker
Although applying for a car loan as a 1099 worker is comparable to that of a W-2 employee, there are a few important considerations to make:
- Make a Larger Down Payment: Aim for a down payment of at least 10% (ideally 20%) of the car’s value. This reduces your monthly payments, improves your chances of securing a lower interest rate, and helps avoid ending up with an underwater loan.
- Shop Around for Lenders: Compare loan terms and interest rates offered by different lenders. While there aren’t specific loans designed for 1099 workers, you’ll find that some lenders are more accommodating than others.
- Boost Your Credit Score: A good credit score demonstrates responsible financial behavior and increases your chances of getting a favorable interest rate. Pay down high-interest debts, set up automatic payments to avoid missed payments, and request credit limit increases to improve your score.
Remember:
- Contract work offers flexibility but comes with challenges like proving employment and income.
- Being organized and keeping track of your income and expenses will help you secure a car loan as a 1099 worker.
- Consider refinancing your car loan with Auto Approve to potentially save money on your monthly payments.
Get Your Free Quote Today!
Don’t let your 1099 status hold you back from getting the car you need With proper preparation and the right information, you can secure a car loan and enjoy the freedom of the open road Contact Auto Approve today for a free quote and see how much you could save on your car loan.
Additional Resources:
Disclaimer:
This information is for general knowledge and informational purposes only, and does not constitute financial advice. It is essential to consult with a qualified financial advisor for any financial decisions.
Can I buy a car if I’m self-employed?
As a 1099 worker, you can be regarded as a slightly riskier loan candidate, but financing a car is still possible. Although lending requirements differ from one lender to the next, generally speaking, you should be eligible for auto financing if you fulfill the following requirements:
- Have a monthly income of at least $1,500 before taxes.
- It is possible to make a down payment of at least $1,000 or 10% of the vehicle’s selling price.
A decent debt-to-income ratio and credit score will also help you get a loan with a good auto loan interest rate.
Here’s how to get a car loan as a contract worker.
An individual who works for a company under contract rather than as a full-time employee is known as an independent contractor, or 1099 worker. Employers will pay them directly and will not through the company payroll system. This means that taxes are not deducted from the contractor’s pay. Being a contractor has advantages and disadvantages, but generally speaking, you have far more flexibility than you would as a full-time employee.
However, a major drawback of contract work is that it’s not seen as being as stable as full-time employment. Additionally, contract income is subject to significant month-to-month fluctuations, which increases the risk of lending for financial institutions.
Here’s What Happens When You Try To Buy A Car With A 1099-A
FAQ
Can you use a 1099 to buy a car?
How do self-employed people buy cars?
Does Carvana accept 1099 A?
Can I use my w2 as proof of income to buy a car?
Do you need a 1099 to get a car loan?
with only a 1099, but you’ll need to bring additional documentation. Some documents that the lender may ask a freelancer for include: Here’s what the lender is looking for in prime candidates for a car loan: . Best of luck with the loan, and with the new ride! “My experience with Jerry has been absolutely incredible.
How do I get a car loan as a 1099 worker?
How to get a car loan as a 1099 worker. Getting a car loan as a 1099 worker is almost identical to the process for a W2 worker. As long as you are organized and have your proof of income ready you should not have a problem applying for a car loan. The basic steps are the same: Gather your documents. Compare lenders. Apply. Sign and Drive.
Can a 1099 employee get a car loan with bad credit?
Even with poor credit. You can still get a car loan if you’re an independent contractor and have bad credit. But, because you’re a 1099 employee, you need to bring in additional documents to complete your auto loan application and prove that you meet the lender’s income requirements.
Can a 1099 worker finance a car?
While you may be considered a slightly riskier loan candidate, it is absolutely possible to finance a car as a 1099 worker. While lending requirements vary from lender to lender, in general you should be able to finance a car if you meet the following criteria: Have a monthly income of at least $1,500 before taxes.