As a self-employed applicant, you do not always meet with approval in credit matters at the car bank or the house bank. However, a car loan for the self-employed does not have to become an impossible task if you keep a few points in mind and make yourself aware of the different car financing options available to you. You can make the car purchase through private or commercial financing, use an installment loan without earmarking or alternatively think about leasing.
Especially the free financial market offers favorable conditions and variety in the car loan. If you are self-employed, it often looks difficult with the protection of the vehicle financing. But there are solutions, for example, by depositing the purchased vehicle as collateral and offering the lender an entry in the vehicle registration document. In these articles, we would like to show you how to get private or commercial financing and get the car loan as a self-employed person without too high interest rates.
Private or commercial vehicle financing?
Tip
Depending on whether the car is to be used for private or business purposes, private or commercial financing is the best option for purchasing a car.
Before you explicitly decide on a loan offer, you should consider whether you prefer financing through your business or privately. If the car is used mostly for business, commercial financing may be the best solution. Especially when building a fleet of vehicles, it may be advisable to think about commercial financing and exclude a private car loan. In this case, you are not liable with your private assets, but bear the responsibility in the car loan for self-employed within the framework of the company. If commercial financing for a car or the entire fleet is on the agenda, don't rely primarily on the car dealer.
In many cases, if you are self-employed and want to finance commercially, you will get more favorable conditions on the open financial market than through the car bank. In commercial and private vehicle financing, the 3-way car loan has proven itself and distinguished itself as one of the most favorable financing options.
You make a down payment, repay the loan installments during the term and pay a final installment at the end of the term. This practice is similar to leasing and is offered by the car bank. In order to find the best solution for you, you should compare several options when it comes to car loans for the self-employed and not let yourself be led directly by the first offer of financing.
This is important
For private car financing, the 3-way car loan has established itself. In addition to the normal monthly loan installments in the specified term, there are two other payments in the process. Make a down payment at the beginning of the loan and a final payment at the end. Car banks offer this type of financing, which is similar to leasing.
Self-employed – Why the car bank can refuse vehicle financing
A few years ago, the job title of self-employed was a general exclusion criterion for most banks. This circumstance did not necessarily result from creditworthiness, but was related to the higher bureaucratic burden. A car loan for the self-employed is not generally excluded today. Nevertheless, a loan request can lead to the car bank refusing the vehicle financing, pointing out that you bring too high a risk due to your self-employed activities.
Attention!
Self-employed persons lack the credit security of a fixed, regular income, which results in a higher risk of default for the banks. Therefore, it is not so easy for the self-employed to get a loan from the band.
In this case you should use the free financial market and inform yourself about the conditions of car financing and alternative credit options. If it comes to a rejection by the car bank, a reorientation from the private to the commercial request can also be helpful. Those who are self-employed or freelance do not primarily have sufficient private collateral for the car loan. The situation is different if the security is provided directly by the company and you agree to a security deposit in the form of the financed vehicles in the case of a car loan for self-employed persons.
The commercial car loan – advantages for the self-employed and freelancers
Commercial financing offers particularly attractive opportunities if you want to apply for a car loan for the self-employed. The fact is that the interest rates are much lower than for a classic car loan for private application. However, you must note that financing as a commercial customer is linked to certain requirements. Thus, you have no possibility to finance a private vehicle commercially and meet the lender's conditions.
Tip
If the car is used primarily for business purposes, commercial financing is a good alternative. With a justification of what the car is needed for, the car can be financed commercially and you benefit from more favorable interest rates than with private financing and tax advantages.
To obtain the car loan through your trade, you should provide the lender with a plausible explanation on the need and show the necessity of a car. If, for example, you are self-employed in trade, in the construction industry or in a travel business, the commercial car loan proves to be a real insider tip with savings potential. You achieve a further saving through commercial car financing, as the interest is tax deductible. If, on the other hand, you finance the car loan for the self-employed privately, the interest is not tax deductible.
Documents for commercial financing
As with the classic car loan, you must also submit various documents for commercial vehicle financing. First and foremost, your credit score is an indicator that determines approval. With commercial car loans your personal creditworthiness plays a subordinate role and the liquidity of the company comes into the foreground. In combination with the explanation of why you need a vehicle for your business, submit the business management accounts and the tax assessment notices for the last two to three years. The amount of necessary documents basically depends on the financing expense and can be more relaxed if you apply for the car loan for a cheaper, used vehicle. Ask for the required documents before applying, so that you can submit all documents for the car loan for self-employed completely.
Assessing creditworthiness in the case of self-employment – pay attention to special features!
Attention!
You are self-employed, which results in a higher risk assessment than for a permanent employee. Even if you have high sales, the auto bank and other lenders rate your risk higher. Therefore, it is particularly important to present a plausible repayment plan and calculate the term, as well as the installments for the vehicle financing with some leeway.
Your chances of obtaining a car loan for the self-employed increase if you can demonstrate good commercial liquidity and an optimal private credit rating. Since the interest rates for a car loan for the self-employed are usually higher than for financing with permanent employees, you should think about a commercial car loan and compare different options. Even as a businessman, if you are self-employed or freelance, you can increase your creditworthiness through some measures and thus ensure a more favorable interest rate.
Chance increase for the car loan by co-applicants
This is important
A second applicant has a positive effect on the conditions of the car loan. The co-applicant can be another entrepreneur, but also a person from your private environment. If you are married, you could include your spouse in the financing process.
This orientation is especially worthwhile if the second applicant is not self-employed but employed in a permanent position. Further, you have the possibility to secure the car loan through private properties.
Whether you want this mix of private and business depends on the situation and your business. If you are a freelancer or self-employed and work on your own, you will generally benefit from private coverage for a car loan for the self-employed. Even if you opt for commercial financing, the security can be provided through your private property, for example, a savings contract or tangible assets.
Make a condition inquiry instead of a credit inquiry when taking out a car loan
As with all loans, you should bear in mind that too many credit inquiries will have a negative impact on your credit rating. But without comparisons, you basically pay too high interest rates. If you are interested in a car loan for self-employed, use the possibility of condition inquiries. In this way, you will receive concrete offers without a credit inquiry being stored in the Schufa with insight for third parties. To compare in detail, at least three offers from different lenders are necessary.
You can ask for the conditions of the car bank and compare them, for example, with a car loan for which you ask for the conditions through an independent financial service provider. In the comparison you will find out which lender will finance you at a favorable interest rate and with the desired flexibility. It is also advisable to compare offers for the private car loan for the self-employed and commercial financing. In order to obtain the best offer, pay the utmost attention to comparing and obtaining offers of terms and conditions and evaluating them.
Loan application vs. Condition request:
Credit inquiry: The credit inquiry is a specific request to the bank, which obtains a report from Schufa and is informed about your creditworthiness. On this basis they can make you a concrete offer. Such an explicit request is stored for one year at Schufa and is visible to third parties for 10 days. This can have an impact on the assessment of your creditworthiness.
Condition inquiry: The condition inquiry, on the other hand, offers the possibility of a credit-neutral inquiry. To be able to give you adequate conditions, a query of the Schufa is also made here, but it remains invisible to third parties. Although it is also stored for one year, but has, unlike the credit request, no negative impact on your credit rating.
The unrestricted installment loan as an alternative
In addition to the classic vehicle financing, you can also finance a car or several vehicles for company use by means of non-purpose installment loans. If you are self-employed for a short time, the request for a car loan for self-employed may be rejected. You are unable to provide sufficient documents to secure repayment because you do not have two to three years of business accounts. Due to the earmarking of the loan, however, the car becomes collateral for the bank and increases the chance of getting a loan.
An installment loan is more straightforward, but should still remain the exception when buying a car for your business. If you finance with a classic installment loan with or without earmarking, repayment options such as balloon financing with a final installment or 3-way financing for the car are excluded. The normal installment loan is not the only alternative, should the bank reject your car loan for the self-employed.
Self-employed: Include leasing as an option in the comparison
Ask yourself whether you really want to own the car, or whether the primary goal is to be mobile in the trade. Because in addition to a car loan for self-employed, you can opt for leasing. While a loan is more difficult to obtain if you are self-employed, a decision on a leasing request is made more quickly and with less bureaucracy.
Therefore, you should not generally exclude this option, but place the costs in the comparison with a car loan for self-employed persons. With leasing, you enjoy a clear advantage over buying if you want to replace the vehicle with a new model after a pre-determined period of time. While you have to sell the car financed with a car loan, you can return a leased car at the end of the leasing period. Even if you are self-employed or freelance, you can finance and lease at low rates.