6 Tips to Buying a Car While Self-Employed

6 Tips to Buying a Car While Self-Employed

December 18, 2023

Buying a car when you're self-employed in Canada brings its own set of challenges, but with the right know-how, it's manageable. Your financial situation might be different from regular employees, making it trickier to get financing.


In this blog, we'll dive into buying a car from a dealership for self-employed individuals in Canada. 


Six tips for buying a car while self-employed:


1. Get a grip on your finances and provide proof of income

Before heading to a dealership, self-employed folks need a good grip on their finances. Because self-employment income can vary, lenders like to see some consistency.

Unlike regular employees with pay stubs, you might not have the same paperwork. But don't worry, there are alternative ways to show your income stability:

Financial Statements: Get your business financial statements ready, covering stuff like income statements, profit and loss statements, and balance sheets, ideally from the last two to three years.

Tax Returns: Hand over your personal and business tax returns—they're solid indicators of your income history.

Bank Statements: Share your bank statements to highlight a steady cash flow with consistent revenue deposits.

Getting your financial papers in order not only speeds up the buying process but also proves to lenders that you're reliable.


2. Build a good credit history

Having a good credit record usually works in your favor when buying a car. Lenders check your credit history to figure out how risky it is to lend you money.

As a self-employed person, keeping a good credit score boosts your chances of getting better loan terms. Aim for a great or good score to unlock options for lower interest rates. 


Read: How to improve your credit score?


3. Search for loan options

Traditional loans might not be the go-to when you're self-employed, but there are other options out there. Check out dealerships that focus on offering auto loans for people who are self-employed. These dealerships work with financial institutions that get the ins and outs of self-employed finances, making it easier for you to get approved for a loan.


4. Save up for a down payment

No matter your job situation, the right down payment can make a big difference in your car-buying journey. With a decent down payment, you cut down on what you need to borrow, leading to lower monthly payments and potentially snagging a lower interest rate.

That being said, $0 down payment car loans are also an option if you need financing pronto. You can go for a down payment that sits well with your finances.


5. Research different car models

Do some research on different models that match what you're looking for and what you can afford. Check out things like gas mileage, maintenance expenses, insurance rates, and how dependable the car is overall. Being self-employed, it's key to find a vehicle that not only fits your business needs but also provides the comfort and convenience you're after.


6. Build self-employment stability

Consider waiting a bit before applying for an auto loan if you've just started being self-employed. Sometimes, even if you try hard, lenders might hesitate if you're new to this and don't have a solid income history yet. It could be beneficial to hold off until you've been self-employed for at least about two years. That way, you can show lenders you've got a reliable income from your business.

To sum up, purchasing a car as a self-employed individual from a Canadian dealership requires a careful, personalized strategy based on your specific financial situation. Know your finances, prove your income right, find the right down payment and research the right car. These steps will steer you towards success in meeting your transportation needs while navigating your self-employment journey.