Auto loan as self employed?

Anonymous · ‎01-13-2012

Does anyone have experience getting an auto loan when you're self employed? I just spoke to one of the CU's I have accounts with (DCU) and they told me they can't process any kind of loans - including credit cards and auto loans - for self employed without 2 years of tax returns. Since this will be my first year filing as self-employed, I obviously won't have two years worth of self-employed tax returns. I'm wondering if anyone has had experiences working with any lenders that are easier to work with in that respect?

StartingOver10 · ‎01-13-2012

@Anonymous wrote:
Does anyone have experience getting an auto loan when you're self employed? I just spoke to one of the CU's I have accounts with (DCU) and they told me they can't process any kind of loans - including credit cards and auto loans - for self employed without 2 years of tax returns. Since this will be my first year filing as self-employed, I obviously won't have two years worth of self-employed tax returns. I'm wondering if anyone has had experiences working with any lenders that are easier to work with in that respect?

This is virtually universal for CU's and banks now.

However, if you go to a dealership, they don't require the tax returns IME.

Remember, when you do file your tax returns, don't be too aggressive on your deductions. Make sure you show some actual income or the tax returns won't help you in the future!

Revelate · ‎01-13-2012

@Anonymous wrote:
Does anyone have experience getting an auto loan when you're self employed? I just spoke to one of the CU's I have accounts with (DCU) and they told me they can't process any kind of loans - including credit cards and auto loans - for self employed without 2 years of tax returns. Since this will be my first year filing as self-employed, I obviously won't have two years worth of self-employed tax returns. I'm wondering if anyone has had experiences working with any lenders that are easier to work with in that respect?

You just need to furnish two years of tax returns. you don't have to demonstrate two years of self-employed tax returns.

Anonymous · ‎01-14-2012

@Revelate wrote:

You just need to furnish two years of tax returns. you don't have to demonstrate two years of self-employed tax returns.

That's what I would've thought, but at least with DCU, they said you have to specifically show 2 years worth of self employed tax returns. The loan officer said tax returns/income prior to being self-employed wouldn't help, it had to be two years worth of self-employment showing on the tax returns.

That's why I'm hoping some other CUs/lenders are a bit more lenient on that. Not like I can magically generate another year of self-employment tax returns when I've only been self-employed in 2011.

Revelate · ‎01-14-2012

@Anonymous wrote:
@Revelate wrote:

You just need to furnish two years of tax returns. you don't have to demonstrate two years of self-employed tax returns.

That's what I would've thought, but at least with DCU, they said you have to specifically show 2 years worth of self employed tax returns. The loan officer said tax returns/income prior to being self-employed wouldn't help, it had to be two years worth of self-employment showing on the tax returns.

That's why I'm hoping some other CUs/lenders are a bit more lenient on that. Not like I can magically generate another year of self-employment tax returns when I've only been self-employed in 2011.

Wow, this isn't even hyperbole: that's one of the most ridiculous things I've heard regarding a loan policy. Cars / mortgages, they just want to see income, and I'm stunned that a W2 employee only really needs to show the last two paystubs on a car loan, and yet two full years of tax returns isn't enough to satisfy an underwriter on a secured loan anyway which an auto loan is.

Check with other lenders, that doesn't seem rational let alone reasonable, though frankly DCU isn't the most sophisticated of lenders.

Anonymous · ‎01-14-2012

@Revelate wrote:
Check with other lenders, that doesn't seem rational let alone reasonable, though frankly DCU isn't the most sophisticated of lenders.

NFCU is who I plan to apply with and hopefully get the loan from, since they've been good to me so far. I just figured I'd check with DCU so I'd have some kind of banking relationship with them - but if that's how they want to be, well.. whatever. I'll just use them for the EQ score.

Mark_in_Pasadena · ‎01-15-2012

What's your credit score & what model/brand of car are you looking into?

I have an 815+ FICO scores, my wife has 780+ FICO scores. We're both self-employed. We both just walk into dealers and STATE our income. Not one shred of proof is ever required once they run our credit scores. The ask us to state the following: occupation, years in the occupation, yearly income. They can then figure out your other debts (mortgage, cars, credit cards) from your credit report. I've never been asked for a W-2, 1099, tax return, bank statement, anything...my word is golden with my high FICO score.

If you have a good credit score, currently you can get the best rates (0% or close to it) from most of the car manufacturers directly. No bank or credit union can match it, because the car manufacturer is selling the loan at cost (they borrow from the Fed at near 0% right now), and just wants to make money on the sale of the car, not the loan. With a bank or credit union, they have the make money on the loan to stay in business.

If you have bad credit, well, then it's a different story.

Mark_in_Pasadena · ‎01-15-2012

@Anonymous wrote:
EQ 677 FICO (01/13/2012)
TU 724 FICO (01/13/2012)
EX 721 FAKO (12/29/2011)

Oops, I just read your tagline and saw your scores there. Your Auto FICO scores should get a nice bump if you have good auto credit history on your report. Your scores aren't stellar, but decent enough to get close to 0% interest from several of the car manufacturer's lending arms directly. They're desperate to make a sale in this economy. No need for you to bother with banks or credit unions...just goto a couple of different car brands and see what they can do for you.

Anonymous · ‎01-15-2012

Right now I'm looking at a 2012 Chevy Cruze, it's about $21k with the package I'm looking at. So it's not really a high-end luxury car or anything, and I don't feel like it's in any way out of my income range. Ideally I want to get a 60 month loan and pay it off faster, so something that doesn't have penalties for early payments would be nice. I plan to put down around 15-20% ($3-5k) as a downpayment, so that should hopefully help out a bit.

The scores (as you noticed) are in my sig. My income this year was $54k (actual income after all the business expenses). I know my scores aren't stellar and I know I'm not going to get the best possible rates, but I'm hoping not to get shafted with some awful 15% apr rate either. I accidentally had two cards report a balance this month instead of one - so my score might jump up a bit by the time I apply anyway.

I figure I'm going to apply for a pre-approval from a few places and see what I can get - and then I can of course have the dealerships see what they can counter-offer me too. As long as I keep all the apps within a short period, the inquiries shouldn't really matter. My logic is that if I already have a pre-approval for a loan, the dealership might be more inclined to try to work with me and get me a low-APR offer. After all, it would make no sense for them to let an almost guaranteed sale walk away.

Mark_in_Pasadena · ‎01-16-2012

@Anonymous wrote:
Right now I'm looking at a 2012 Chevy Cruze, it's about $21k with the package I'm looking at. So it's not really a high-end luxury car or anything, and I don't feel like it's in any way out of my income range. Ideally I want to get a 60 month loan and pay it off faster, so something that doesn't have penalties for early payments would be nice. I plan to put down around 15-20% ($3-5k) as a downpayment, so that should hopefully help out a bit.

Take a look at a Honda Civic and Toyota Corolla. I know 4 months ago my niece's friend who doesn't have a great FICO score (around 680 across the board), but has always had perfect car payment history was able to get a 1.9% loan from Toyota Financial on a new 2011 Toyota Corolla that was still in the lot as they were trying to push in the 2012 models in the door. Toyota in particular was very agressive in their financing these past 18 months to try to combat all the bad press they got from the rash of recalls they had in 2010.

Toyotas Corollas and Honda Civics might be a little more expensive than the Cruze for the same options, but they maintain their re-sale value a lot better than the Cruze (much, much better...just run the KBB on previous year Cruze vs previous year Civic or Corolla). People who have had the pleasure of 10+ years of trouble-free use of a Corolla or Civic know that a 4 year old Civic or Corolla is as good as new, whereas the American economy cars are on their last leg by then, so they're willing to pay a lot of money for a used one.