If you are a new vehicle buyer with a healthy credit score, chances are a lender won’t have second questions about your income claims. However, things can be different for those who may have less than perfect credit.
Depending on the source of your income, you will be asked to provide certain documentation to prove it. If you are asked to provide proof of income, here is what you can show the dealership.
Proof of Income as an Employee
If you are a W-2 employee, the most common form of employee, your employer automatically withholds your taxes from your paycheck, which includes social security, income tax, and medicare). As an employee, you most likely receive payment on a weekly, bi-weekly, or monthly basis.
The checks your employer provides will often come attached with a pay stub which lists your income along with the tax withholdings for the pay period. This pay stub is what most auto lenders and creditors are looking for when they ask you to provide proof of income.
A lender will typically want to see the most recent and up to date pay stub you can provide. A lender may also ask that you provide all pay stubs for a certain period of time.
If you are paid with a handwritten check or the checks do not include a year-to-date income information, your lender may not allow you to use them. In this case, you will need to contact your employer and ask them to provide a document showcasing your income.
Proof of Income as a Self-Employed Person
People who are independent contractors or are self employed do not receive a W-2. More often than not, those that are self-employed will receive a 1099 form from each source of income. If you own a business and completely work for yourself, then chances are you will receive no documents.
Most lenders considering approving a bad credit customer will need at least two or three years of self-employed tax returns to make an informed decision.
A lender will use your net income after deductions your gross income for an auto loan. A lender could also ask you to provide a bank statement, although they usually aren’t enough alone to provide real proof of income.
It can be challenging to find a lender that can work with you and your employment situation. To save as much time possible, be sure to have proof of income ready when you walk into the dealership.
If you have bad credit but are in need of an auto loan, Crediready can help. Our network of trusted and verified lenders work with buyers in all credit situations. To get started, fill out our 100% free auto loan inquiry form and start shopping for your next vehicle today!