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Minimum Income Requirements for an Auto Loan

Milad Hassibi April 24, 2018


If you are looking to buy a car, you may be wondering what income you need to qualify.

Financing a car with an auto loan has various requirements, and your income is included in that.

Your credit score may also play a large role in exactly what minimum income is required for a car loan.

Minimum Income for a Car Loan

Most lenders look for a minimum pre-tax income of $1,600 to $2,000 per month.

Most bad credit auto lenders like to see that an applicant is spending no more than 20% of their A woman with a magnifying glass is shocked about the minimum income requirements to finance a cartotal pre-tax income towards any car-related expenses.

This can include insurance, registration, and other vehicle-related expenses.

You will most likely be required to prove this by providing your pay stubs for the last 30 days or some other proof of income.

Buyers with multiple jobs can typically only use one pay stub. Two pay stubs cannot be combined to meet the minimum income required for a car loan.

For consumers with multiple sources of income, it’s advised that you use the paystub with the highest income when applying for an auto loan.

Minimum Income for a Car Loan with Bad Credit

If you have a less than perfect credit score, you will still need to earn $1,600 per month pre-tax.

You will have to meet all the lender qualifications such as income, employment status, and more to finance a car purchase.

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Lenders and creditors need to be confident that you will make your auto loan payments in full without falling behind.

Lenders will consider the amount of down payment as well. The smaller the loan they give, the less risk you pose to your lender.

If you have bad credit, its best to provide a 20% down payment to help increase your odds of approval.

The length or duration of the loan term also plays an important factor, as buyers with bad credit may have a history of bad purchases.

Many bad credit buyers opt-in for loan terms of 72 months, but this can add a large amount of interest expense to your loan.

Your debt-to-income ratio (DTI) and also your payment-to-income ratio (PTI) also play key roles when figuring out the minimum income for a car loan.

Debt to Income Ratio for a Car Loan

Your debt-to-income ratio for a car loan (DTI) is the total amount of all your monthly expenses and bills, including your possible new monthly car payment and insurance payments divided by your income before any and all taxes.

Lenders typically want to see DTI ratios less than 50% of your income. If you earn $3,000 per month pre-tax, your total monthly debts/obligations should not exceed $1,500 per month.

Payment to Income Ratio for a Car Loan

Your Payment to Income Ratio (PTI) will show lenders how much of your income can be spent on car-related expenses. This includes auto loan payments, insurance expense, gasoline, and repairs.

Most lenders will approve you for an auto loan if your PTI is 15-20% of your total monthly pre-tax income.

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Some lenders refer to this as the car payment to income ratio, or car to income ratio.

For example, if your monthly pre-tax income is $2,000, then you can afford up to a $400 per month on any and all car-related expenses.

We found this by taking $2,000 and multiplying it by 0.20, which is 20% in decimal form.

Final Note

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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