The amount you can afford to buy and run a car is one of the most important things that lenders consider when deciding whether to offer you finance. Typically, the lower your income, the less you can afford to borrow.
That’s not the end of the story though; your credit score, the car you want to buy, and the type of loan you’re looking for will all play a part.
Even if you have bad credit, there are financing solutions available to help you secure car finance despite financial difficulties.
If you work a minimum wage job but have very low expenses – if you live with your parents rent-free, for example – you may still be able to afford a relatively high car finance payment. In contrast, if your living costs are higher, but the car you want to buy is older, cheaper, and more efficient, you may still qualify for a small loan.
When you apply for car finance on minimum wage with Young Car Driver, you’ll receive a decision in minutes – and getting a quote won’t impact your credit score.
How much do I need to earn to get car finance?
There’s no minimum monthly income you need to have to be eligible for car finance.
Your income is one of the factors that lenders consider, but they will also be looking at how much you spend, how much you regularly receive each month and your credit rating.
Most lenders will require proof of income as part of your car finance application, and this might include copies of your recent bank statements or three months’ worth of payslips.
How does car finance work with a low income?
No matter how much you earn, the car finance process works the same for everyone.
If you’re approved for a hire purchase (HP) or personal contract purchase (PCP) loan, you’ll typically pay a deposit upfront (if you can) and then pay back the remaining balance in fixed monthly repayments.
Keep in mind that lenders might think of you as a higher-risk borrower if you have a low income. Having bad credit can also make you a higher-risk borrower. An unexpected bill or rise in the cost of living could stretch your finances and make you more likely to miss a car finance payment.
When looking for car finance on minimum wage, check the total cost of finance and look out any deals that seem too good to be true. Responsible lenders should always carry out affordability checks and only offer you a loan they know you’ll be able to repay.
How does low income affect my affordability?
Qualifying for car finance with a low income can be easier if you have a good understanding of your affordability – that’s the amount you can afford to borrow without impacting your essential expenses.
If you earn minimum wage, take time to work out your budget and determine whether you’ll be able to afford a monthly car finance repayment on top of your other expenses.
Of course, this won’t be the only cost associated with owning a car; you’ll also need to pay for fuel, insurance, road tax, repairs, MOT, and services.
The more disposable income you have, the more likely it is that you can afford a car payment.
How can I improve my chances of getting car finance on a low income?
Increasing your income or finding work that pays more than minimum wage isn’t always possible, but there are other steps you can take to improve your chances of getting a low-income car finance loan:
Improve your credit score
A good credit score reassures lenders that you’ll make your monthly repayments on time and in full. It could also help you secure a loan with a lower interest rate. If yours could do with some work, registering on the electoral roll, keeping your credit utilisation low, and avoiding making too many finance applications in a short time could all help improve your credit score.
Save a larger deposit
While no deposit car finance is available, saving a larger deposit could help improve your loan eligibility if you have a low income. The more money you can put down upfront, the less you’ll need to borrow, and the lower your monthly repayments will be.
Consider a guarantor or joint car finance loan
A joint or guarantor loan could offer a solution if you struggle to get car finance independently. With joint loan car finance, you and another person will be equally responsible for the car loan, meaning both monthly incomes will be considered. In contrast, a guarantor car loan will remain in your name only, but have a guarantor with a good credit score who is willing to step in and cover your repayments if you can’t.