Self-employed car finance options

Women in car showroom after buying a new car

Published: 15/11/22

If you’re self-employed, you’re probably already aware that accessing credit or finance isn’t always that straightforward. However, when it comes to finding self-employed car finance options, you’ll probably find there’s more available than you first thought.

So, what options are there? Well, if you’re looking for car loans for self-employed workers, you will be limited to lenders who will consider offering personal loans to people with non-traditional forms of income. The same goes for finding car finance for self-employed individuals, such as hire purchase (HP) and personal contract purchase (PCP). 

To help you work out which is the best option for you, we’ve run through all the ways you can finance a car if you’re self-employed.

Can I get car finance if I’m self-employed?

There are many options to finance a car if you’re self-employed. Here’s a quick run through of the main self-employed car finance options if you don’t have the cash to buy a car outright.

Car loans

Many lenders offer specific car loans that enable you to buy the car of your choice and repay what you owe in monthly instalments, plus interest, over the course of your loan term. You can usually set up a direct debit with your lender to make sure you never miss a monthly repayment.

Here at Aro, we can check your eligibility for personal car loans from £500 to £35,000 spread over terms of one to seven years.

Hire purchase

As well as car loans, you could also consider hire purchase (HP). With a HP agreement, you essentially hire a car from a car dealership, and make monthly payments to the car dealership until the end of the agreement. You sometimes also have to make an initial deposit, often at around 10% of the car’s value. When the HP agreement ends and the final payment is made, you will become the legal owner of the car.

At Aro, we can check your hire purchase options for amounts up to £200,000 spread over one to six years.

Personal contract purchase

Another self-employed car finance option is personal contract purchase (PCP). PCP works in the same way as HP, however the car’s depreciation in value over the time of the agreement is factored into the size of the monthly payments. This means that the monthly payments are often smaller than they would be for with HP. However, if you’d like to keep your car at the end of the PCP agreement, you’ll need to pay a larger balloon payment. If not, you can often hand the car back to the dealership and work out a car finance plan for a new vehicle.

Personal contract hire

Finally, if you’re confident that you won’t want to keep your car at the end of your car finance contract, you could opt for personal contract hire (PCH), often referred to as car leasing. With PCH, you’ll usually need to put down an initial deposit, then you’ll simply pay for your car in monthly instalments over a set period of time. When your contract comes to an end, you hand the car back to the car leasing company.

Just remember that when you apply for car finance,  it is subject to status.. This means your credit history will be looked at. You might also need to provide income documentation for the tax year as well.

Is it harder to get car finance if I’m self-employed?

It can be a little more difficult to finance a car if you’re self-employed. This is because not all lenders will offer car finance or car loans to self-employed individuals, so your borrowing options may be a bit smaller. You may also have to provide a bit more paperwork to support your application.

However, no matter if you’re self-employed or in more typical employment, accessing car finance will come down to your credit history.  A lender will check your credit report to ensure you will reliably meet your repayments. If you have a lower credit score, it may be more difficult to access car finance. Although, depending on your circumstances, some lenders may still have options for you even if you do have a poor credit history.

If you do have a poor credit history, there are ways to improve your credit score. Check out our guide to improving your credit score for a few simple ways to give it a boost.

Providing proof of income is where your car finance application might require a little more legwork. As well as three to six month’s worth of bank statements, you may also need to supply details of your company accounts, a five year employment history document from HMRC and five year’s worth of tax returns.

Beyond this, financing a car when self-employed shouldn’t be any more difficult than it is for regular employees.

Do I need proof of income for car finance?

For any car finance application, you’ll need to prove your income. But there’s no need to worry. This is simply to prove that you can meet the repayments.

How a lender wishes you to prove your income will depend on them. Some will simply ask for bank statements and others will need a little more detail. Most will run a credit check to assess your credit history too.

Are there any loans for self-employed borrowers?

If you’re self-employed, a personal car loan is certainly an option for you. Whether you’re eligible or not will depend on several factors, including your monthly income and credit rating.

Personal car loans for those who are self-employed range from £500 to £35,000 over terms of one to seven years. The representative APR that you are offered by the lender will also come down to your credit score. The better your credit score, the lower the APR you’re likely to be offered.

If you’re a homeowner, you may also be eligible for an execution-only secured loan of up to £50,000. A secured loan is secured against your home. This adds an extra level of security for the lender, enabling them to offer higher amounts with longer repayment terms. However, if you are unable to make your loan repayments, the lender could repossess your home as a last resort to recover their costs.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

It’s likely that you will have many of the same options as a person who is not self-employed when it comes to finding self-employed car finance. Whether you use the car for personal or business purposes, or a mix of both, is up to you.

Remember, if you do use your personal car for business purposes, you may be able to claim back tax relief on mileage expenses.

Compare car loans for self-employed in minutes

Ready to start your car finance search? Well, there is a range of different car finance and car loans for self-employed people that you can choose from. When choosing the right car finance option for you, the key things to think about are:

  • Whether you want to keep the car long term
  • Whether mileage restrictions would impact you
  • The size of the monthly repayments you can afford
  • If you can afford to put down a deposit

Understanding self-employed car expenses is also important as you may find you can claim back some of your outgoings against tax. This could therefore affect the self-employed car finance options available to you. If you think you now know which car finance option you want to go for, you can check your eligibility with us in minutes.

If you have more questions about financing a car as a self-employed person, have a look at our credit broker car finance services. All the information you need is available here, or if you have a specific question, take a look at our FAQs section to learn more. There’s also a guide to financial terms you might find useful.

Share this page

Recommended Guides