Applying for a Car Loan When You’re Self-employed

Being self-employed comes with an array of benefits – everything from being your own boss to claiming a range of tax deductions when buying a new car.

The benefits

For example, if you’re self-employed, you can use the depreciation of the purchase, as well as claim the interest as expenses, when you do your annual tax returns. The exact amount and proportion of what you can claim will be dictated by what you’re using the car for, and what proportion of the use is for business. Always speak with your accountant about your specific situation. When you’re self-employed, there are a couple of things you need to take note of when applying for a car loan:

The documents

Firstly, the documents you’re going to need for the loan application process is different from that for employees. We cover this in more detail in our blog “The 3 core documents you need for car finance” so you may want to review that too, just to be prepared.

If you have been trading for a couple of years, you may qualify for a ‘Low Doc’ loan, where you simply self-declare that your business is able to afford the loan. You will need to verify your identity and your accountant or tax agent will need to verify that the car is primarily for business purposes. Otherwise you will need to provide documents that prove that your income is sufficient, and regular enough, to service the repayments. This may include Business Financials and -depending on the lender- bank statements.

This will stand whether you’re a sole trader, partnership or company. And depending on how complex your business structure is, you may have to provide further evidence, such as a trust deed or director’s guarantee.

The loan type

The other main difference for the self-employed is the range of commercial car loans you can apply for.

As a commercial car loan applicant, you can consider taking out a chattel mortgage, a lease, or an operating lease on the car. Of course, there’s the option to just apply for a standard car loan under your personal name and claim the business use portion at tax time, if that suits your situation.

Typically a chattel mortgage is the most popular option for self-employed applicants. But take note, there are a variety of business loan types available to suit your situation.

And because these loan types are intrinsically tied to the type of expenses you can claim and what type of structure you’re set up with – if you don’t choose the right loan type for you, then you may not get the full benefit that you’re entitled to. So before you go for a car loan, make sure you understand what structure you’re operating your business under. Do that by simply contacting your finance broker who will be able to provide all the particulars, and even suggest the best loan type for your situation.

Then what?

Once you have your documents in hand, and understand your business structure, just give the team at Auto Car Loans a quick call on 1300 301 051. We can take you through all the particulars of each loan that’s available for you, and make the application process easy.

One of our friendly and professional team are ready to help, just ring 1300 301 051


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