Car finance lenders need to know your income to double-check that you can comfortably afford the loan you’re being offered. You can provide proof of income whether you’re employed or self-employed by providing recent payslips, bank statements, or copies of your company accounts if you own a limited company.
Why do car finance lenders need to know my income?
When you apply for car finance, lenders will ask you questions about your income and employment status.
You’ll be asked to confirm whether you:
- Work full-time
- Work part-time
- Are self-employed
- Are a student
- Claim benefits such as Universal Credit or tax credits
- Are unemployed
- Are retired
- Receive a pension
Alongside your employment status, you’ll need to confirm how much you take home on an average month after tax.
These two pieces of information will then be fed into an affordability check. This check is becoming an important step in the car finance eligibility category as it confirms you’ll be able to afford your monthly car finance payment without overstretching your budget and ending up in financial difficulty.
What proof of income do car finance lenders accept?
Most lenders will ask you to prove your income using recent payslips or bank statements covering the last three months.
If you’re providing bank statements, they should show your full name, account number, sort code, and all transactions made.
Alternatively, you may be invited to use Open Banking. This is a new tool some lenders are using to assess affordability and can be especially effective for people with uncertain incomes due to being self-employed or those who have missed payments in the past and now have a bad credit score.
If you give permission, the lender will be able to use Open Banking to verify your income and view your expenditure. This gives them a more holistic, real-time insight into your finances and shows how well you manage your money on a month-by-month basis. Open Banking can be a good way for you to prove your income if you have a side hustle as a content creator or Vinted seller or a good pot of savings that you plan to use to fund your car finance payments.
How many payslips do I need for car finance?
If you’re employed, you’ll likely receive a payslip each month detailing your salary before and after tax. These can be a great proof of income. However, you’ll usually need to supply at least three months of payslips to get an average just in case you had one month where you earned less than usual as you were on holiday and another when you took on lots of overtime and took home a chunkier pay packet than usual.<
Can I get car finance without proof of income?
Affordability checks are an important part of being a responsible lender. That’s why it can be more difficult to get car finance without proof of income, but it might not be impossible thanks to open banking.
No matter whether you’re unemployed, self-employed, or claiming benefits, you can still provide proof of income via bank statements.