Being self-employed comes with many freedoms, however it also may make financing a car seem slightly more complicated. Without a regular salary, lenders may see a potentially varying income as a risk. That being said, the application process is pretty much the same as for anyone else - you just might be expected to provide some extra documentation. That’s why you should consider your options carefully when financing a car if you’re self-employed.
Whether you’re looking for a reliable vehicle for client meetings or simply to get from A to B, understanding the best way to buy a car when self-employed can help you make a confident, informed decision.
There are several car finance options available, each with its pros and cons depending on your financial situation, credit profile and how you plan to use the car.
Unsecured Personal Loan
With a personal car loan you borrow a lump sum from a lender, buy the car outright and make fixed monthly repayments. Because you own the vehicle from day one, it offers flexibility - especially if you plan to use it for both personal and business needs. While no upfront deposit is required, it’s important to note that the interest rate and monthly payments can be higher than with other car finance options.
Hire Purchase (HP)
Hire Purchase is a great option for self-employed drivers who want predictable monthly payments and eventual ownership. You make a regular monthly payment for a car with a fixed interest rate – meaning you know exactly how much you are paying every month. The deposit can be flexible or even not required at all. The car is owned by the lender until you pay the last monthly instalment and the option to purchase fee.
Personal Contract Purchase (PCP)
PCP finance is a flexible solution where you buy a car through fixed monthly instalments, like hire purchase. PCP tends to have lower monthly payments as you don't have to pay the car's total value. But should you decide to keep the car at the end of the agreement you will need to pay a substantial ‘balloon payment’ to purchase it outright.
Personal contract hire (PCH)
Personal Contract Hire (PCH) is a flexible leasing option that lets you hire a used car for a fixed term with manageable monthly payments and an upfront rental fee. You get full use of the vehicle during the lease, but keep in mind you'll be responsible for upkeep costs. You then return it at the end - there’s no option to buy, making it ideal if you prefer driving the latest models without long-term ownership.
Explore your options in more detail on our car finance page.
While getting approved for car finance when self-employed may be slightly more time-consuming and require some extra documentation, there are steps you can take to boost your chances:
Register on the electoral roll
Make sure you are registered on the electoral roll. This confirms your address and identity and is a fundamental component of a good credit record.
Income Stability
Lenders want to be confident that you can manage the monthly payments. Some will accept potential income fluctuation if you can show evidence of consistent earnings over time. A strong record of your business performance and at least one to two years of accounts can help your car finance application.
Credit Score
A healthy credit score is helpful to secure competitive car finance deals. If your score is less than perfect, there are still options but you may face higher interest rates. Learn more in our article: Navigating Finances: What Is a Bad Credit Score?
Loan Terms
It’s important to decide how long you want to keep the car before committing to a finance deal. Shorter terms typically mean higher monthly payments but lower overall interest. Longer terms can reduce monthly costs but may increase total repayment. If you are able to contribute a portion of the payment in cash that could help reduce the total amount you require to borrow and increase your chances of securing finance.
Leasing a Car
If you’re not interested in long-term ownership, then leasing a car when self-employed could be an attractive option as you may benefit from certain tax benefits whilst shorter agreement lengths mean you have access to the latest models.
Lower upfront costs and fixed monthly payments
Possible tax benefits if the vehicle is for business use
No long-term ownership - you hand the car back at the end of the lease
Buying a Car (Car loan, HP, PCP)
If you’re looking for finance that will end in eventual ownership then a car loan, HP or PCP may be more suitable for your situation.
At the end of the term, you own the vehicle (HP) or have the option to buy it (PCP)
Own the vehicle from day one (car loan)
Typically, there are no mileage limits with a car loan or HP
Whilst there’s no specific income requirement, leasing companies generally prefer a stable income to make sure you have the means to keep up with monthly repayments and any other expenses. Therefore, you may be asked to provide recent bank statements or trading accounts and require a credit check to access your financial stability. If your earnings do fluctuate then a larger deposit may increase your chances of securing finance as it reduces the lenders’ risk.
Final Thoughts
Whether you’re a freelancer, small business owner, or sole trader, the best way to buy a car when self-employed depends on your credit profile, income consistency, and how you plan to use the vehicle. By understanding your options and preparing your finances, you can find a deal that suits your needs - and keeps your business moving forward.
Can I get car finance if I am self-employed with bad credit?
You don’t necessarily have to have a good credit score to be approved for self-employed car finance. Some lenders are willing to help borrowers with a poor credit score, and a few even specialise in poor credit history finance.
So, if your credit score isn’t great, it doesn’t necessarily mean that you won’t be able to finance your car. It just means that you might have to shop around to find the right lender for you. Keep in mind that borrowing with bad credit may come with higher interest rates and monthly payments, so the overall cost of finance could be more.
Be careful though: if you’re struggling to pay off your existing debts it’s always best to get on top of these first before borrowing more. Talk to your lenders to make a plan to get your finances back on track. This will help to improve your credit score.
There are charities and organisations who can offer advice, help and support if you're in difficult circumstances. Find out more here.
What is the easiest type of car finance for self-employed people?
Self-employed people can apply for any type of car finance and the best option will depend on your personal situation. Some of the most popular types of car finance are PCP and HP and these finance types are secured against the vehicle so may be more accessible for self-employed people.
What documents do I need to get car finance as a self-employed person?
If you’re applying for car finance as a self-employed person you might be required to supply a few extra documents. Every lender will have their own criteria, but broadly you can expert to provide some, or all, of the following:
3-6 months’ worth of bank statements
Recent tax returns
Details of your trading accounts if you are a registered company
Can I get used car finance when self-employed?
Yes, used car finance is available with the right documentation and credit history. When you apply for used car finance when self-employed, lenders will carry out the same credit and eligibility checks to determine if they can offer you a finance agreement as they would for any other type of car finance.
Can I get van finance if I am self-employed?
If you're self-employed a van is often crucial to the day-to-day running of your business. Many lenders offer van finance options for sole traders and small businesses. If you’re a sole trader in need of a single vehicle, Oodle could be the answer.
