A man is excited about his new car and his 740 credit score

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. Obviously, there isn’t a minimum income requirement to purchase a car outright in cash. However, financing a car with an auto loan has various requirements, and your income is included in that.

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

Minimum Income for a Car Loan

Although the amount will vary from lender to lender and from location to location, most financial institutions look for a minimum income requirement of $1,600 to $2,000 per month before any and all taxes.

Most bad credit auto lenders like to see that an applicant is spending no more than 20% of their total pre-tax income towards their auto loan. This can include insurance

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 requirements for a car loan.

It’s advised that you use the paystub with the highest income when applying for an auto loan.

Buyers with Healthy Credit

If you fall into the category of good credit (usually a credit score of 650+), you won’t have too much difficulty financing a car. Having a healthy credit score will allow lenders to focus less on your income and more on other factors that relate to a car loan, such as your debt-to-income ratio (DTI) and also your payment-to-income ratio (PTI).

Buyers with Less Than Perfect Credit

If you have a less than perfect credit score, you will be evaluated much more carefully. You willA woman in a magnifying glass looking at her credit score have to meet all the lender qualifications such as income, employment status, and more to finance a car purchase.

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.

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 and payment to income ratio is another factor lenders will consider when it comes to car buyers with bad credit.

Get a Car Loan with Any Credit Along with a Happy Couple and a New Black SUV next to them

Debt to Income Ratio for Car Loan

Multiple sources of income will help with your Debt to Income Ratio (DTI). Your debt to income ratio is the total amount of all your expenses and bills, including your possible new monthly car payment and insurance payments divided by your income before taxes. Lenders typically want to see DTI ratios less than 50% of your income.

Your Payment to Income Ratio (PTI) will show lenders what percentage of your income will be spent on your auto loan payment and insurance payment for that car. This is typically capped around 15% to 20% of your total income.

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/mo auto loan. 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 finance your new car and have less than ideal credit, CrediReady offers one of the largest databases that connects dealerships, lenders, and buyers in all credit situations. Take a few moments to fill out our free and confidential loan search form online and we will match you with a dealership in your local area that can meet your auto financing needs

Free Credit Score

Get your free credit score now! Get a copy of your most recent credit score.
get your free score

Auto Insurance

Get your free insurance quote now! Save big on auto insurance today!
get your free quote

Vehicle Warranty

Protect your vehicle and you could save thousands on auto repairs.
get your free quote