Can I get auto financing if I am unemployed?
One of the most frequently asked questions is how people can get auto finance approval if they are unemployed.
For many people, having a car is essential for getting to work or getting around in general. It is true that many people can get by in a place like London by relying only on subways, trains and taxis. But if you live and work in places that aren’t as well served by public transportation, it can be nearly impossible.
But what if you don’t have a job? Can You Get Auto Financing Approval If You Are Unemployed?
The short answer is that it is possible, but often very difficult. Obviously, the finance company wants to know that you can afford to make your regular monthly financial payment every month, and if you can’t show income, they’ll rightly assume that you won’t be able to. ‘make payments.
If you have a regular source of income that is not necessarily from work, such as rental income from a property, this will be useful as long as you can prove that it is reliable income and reported on your return. of income. A lot of people have unconventional sources of income, but the point is, it has to be verifiable.
Odd jobs here and there, or gifts from mom and dad, probably won’t be enough to convince a finance company to lend you money for a car.
The reality is that many lenders will simply turn you down for a loan if you are unemployed, regardless of extenuating circumstances. Lenders who are willing to offer you a loan will almost certainly do so on less favorable terms than you would be offered if you were employed.
But I always had a job – it’s only temporary
This is a very common situation – you can show that you have been happy at work for years and that your future employment prospects are great. But you don’t have a job right now.
If you have a strong work history, it will definitely help you get approved for auto financing. But the reality is that some lenders will just keep saying “no”. Others will say “yes”, but they will hit you with a higher interest rate and / or fees, or limit the amount they are willing to lend you.
The finance approval process involves assessing the risk. While of course there’s no guarantee that having a job today means you won’t suddenly be out of work three months from now, it’s still a better bet than someone who doesn’t have a job. job now and cannot guarantee when he can start a new job.
It might seem unfair if you’ve had a clean work history so far, but finance companies know the odds based on years and years of data, and it inevitably shows that people who are unemployed are more likely to have financial problems than people with jobs.
But I have enough money in my account to go on for months
Even if you’ve been a diligent saver and made sure you have a decent buffer to keep you going during your search for a new job, the finance company will still consider this to be a significant risk if you do not have a reliable and regular income.
For years, it has often been said that most people are just a few paychecks from roaming, and it is still a fairly precise situation. The coronavirus pandemic certainly hasn’t helped that at all, and the market could take years to recover.
But my partner has a good job
This is very common and may or may not be helpful. Most finance companies don’t allow joint auto loan applications, but they can factor in household income if you are married. If you’re not married, that’s usually not very helpful – banks aren’t making social judgments, it’s just looking at the data that shows married couples tend to have finances. more stable than unmarried couples.
Your partner / spouse may be able to vouch for your financing request, but it is less common than for parents to be able to vouch for their children’s loans.
Is age a factor?
Yes, age will inevitably come into play, although that is not necessarily a deciding factor. If you are 22 and unemployed, you are likely to be considered a higher risk than a 42-year-old and unemployed, as you are unlikely to be able to present an employment history and status. financial stable.
When you are younger your financial situation tends to be more volatile than when you are older and have ‘settled in’. During the life of the funding agreement (usually three to five years), your financial situation is likely to change more drastically than that of an already middle-aged person.
Your income is more likely to increase during this time, but your expenses usually increase significantly as well. You are also more likely to change jobs more often at a younger age (either by your own choice or against your will) compared to older people.
All of this adds risk to a lender, so if you are unemployed now, it works against you. Again, financial companies base their decisions on their data, and they have statistics that inform them of relative risks.
Play the long game
The simple reality is that not having a job will drastically reduce your options for financing a car. Most people will find lenders who will give them a loan, but terms are likely to be unfavorable.
Consider your options carefully and be prepared to lower your expectations significantly. If you are truly convinced that you are only at a short-term stalemate, look for short-term solutions rather than committing to a bad loan over a long period of time.
By short term solutions I don’t mean payday loans unless you are seriously desperate right now and extremely confident that you can erase debt in a very short period of time – payday lenders thrive on borrowers who cannot write off their debts and get caught up in a downward spiral of endless problems.
Can you get by by public transport or taxi for a few months? If you normally spend a few hundred dollars a month on a car loan and the associated costs (insurance, fuel, maintenance, road tax, etc.), that could cover a lot of bus or taxi tickets.
Riding a bike, carpooling with co-workers or friends, renting a car when you absolutely need to – there are usually options (although not very good) that can keep you going in the short term so that you are in a much stronger position to apply for a loan in the future.
Are you looking for an alternative to dealer financing? At The Car Expert, we establish business partnerships with companies that can provide you with competitive auto finance offers on a new or used car. Check them out before signing a finance agreement with a car dealership: