A man tries to approve his income for a new white Jeep SUV

How to Prove Your Income for an Auto Loan

Milad Hassibi December 29, 2018

If you are looking to purchase a car with an auto loan, chances are your lender will ask you to provide proof of income. Proof of income is important to lenders since it can help them evaluate how large of a loan you qualify for.

Proving your income as an employee

If you are a W-2 employee, the most common in the United States, you are likely to receive a paycheck monthly, bi-weekly, weekly paycheck from your employer. These paychecks will usually come with a pay stub showing your income, withholdings, and year-to-date totals.

Inside a dealership lot where auto lenders verify your income

If you have bad credit and are trying to qualify for an auto loan, this pay stub can serve as a form of proving your income for an auto loan. Some lenders may require you to bring in multiple forms as proof of your income.

It is important to note that if you get handwritten checks or pay stubs you will not usually be able to use them as proof of income. Instead, see if your employer can provide you with a verified computer-generated form that can provide this information. Some auto lenders may also accept a letter from your employer listing your income.

Proof of income for self employed people

If you are currently self-employed, you will not have a W-2 to use as proof of income. Being a 1099 contractor makes it difficult to get approved, but not impossible.

If you qualify as an independent contractor receiving income from one or more sources, you will receive a 1099 from each of these sources. This 1099 form will be accepted by most auto lenders as a form of proof of income. However, only one 1099 income source is allowed to be used in the approval process.

If you work for your own business, you will not have any type of government form. Instead you will be paying taxes on a quarterly basis. For consumers like this, most auto lenders will require you have two to three years of tax returns as proof of income.

Lenders will use your net income after business deductions to see if you can qualify for an auto loan. In addition, auto lenders may require your bank statements to verify the income is coming from your job source into your accounts.

Can fixed income be used?

If you no longer receive a regular income and have disability or social security as an income source, you may struggle when trying to find proof of income for an auto lender.

If this is the case, most lenders will usually require a monthly pre-tax income of $1,500 to $2,000. Lenders will also require part of the income to be garnishable, which disability and social security typically are not.

In this circumstance, you will need to provide your lender with your social security benefit verification letter. Although this can suffice as a proof of income, it may not be accepted by auto lenders as it is not garnishable income.

If you find yourself struggling with providing proof of income on social security of disability, consider using a cosigner. Using a cosigner with good credit can likely qualify you for an auto loan as long as all requirements are met.

Final Note

Proof of income plays an important role in the auto loan approval process. If you are looking to buy a new car but have less than perfect credit, CrediReady can help.

Our nationwide network of trusted dealers and verified lenders work with buyers in all credit situations. Take a moment to fill out our free no-obligation loan inquiry form and start shopping for your dream car today!

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