Car finance when you have been self-employed for less than two years
There is no official rule that says you must be self-employed for two years before you can borrow for a car. Lenders set their own comfort levels, and a short trading history usually means more questions, more paperwork and sometimes a deposit. Nobody can promise approval, but a clear paper trail and a realistic loan size help.
The short answer
If you have been working for yourself for less than two years, you can still apply for car finance. The common worry is that lenders insist on two years of tax returns. Some do prefer it. There is no New Zealand law that sets a minimum trading period, though, and lenders vary in how much weight they put on it. What they all need is reasonable evidence that your income is real, regular and enough to cover the repayment after your costs.
Fair Finance is a referral service, not a lender and not a broker. One application and one soft credit check go to a panel of approved New Zealand lenders. We are paid by the lender only if a loan settles, and that never changes your rate. Nobody can promise approval, and lenders decide case by case.
Why a short history makes lenders cautious
A lender is trying to work out whether you will be able to make every repayment for the whole term. A salary gives them a simple answer. Self-employed income is harder, and when it is new there is less to go on:
- There may be no tax return yet, or only a partial year.
- Income is lumpy in the first year. Quiet months, slow-paying customers and set-up costs can all distort the numbers.
- New businesses fail more often than established ones. A lender will not say so out loud, but it is part of the thinking.
- Costs can be hidden. Gross takings are not the number that counts. After tools, fuel, insurance and tax, the profit you actually keep is smaller.
Lenders must make reasonable inquiries into your income and expenses and be satisfied that you can meet the repayments without substantial hardship. Consumer Protection describes this as the affordability assessment. A short history simply means the lender needs more evidence to be satisfied.
What helps instead of two years of returns
You can stand in for a long record with other proof. Think of the application as three layers.
Layer 1: what you have earned in the business so far
- Bank statements. Three to six months, ideally on the account your customers pay into. Your income should be easy to see, and your spending should look responsible.
- Invoices and payment records. Recent invoices, with proof they were paid.
- Your first tax return or Inland Revenue figures, if you have filed one.
- GST returns, if you are registered. Inland Revenue says you must register for GST if you carry out a taxable activity and your turnover was at least $60,000 in the last 12 months, or you expect it to be in the next 12. You can also register voluntarily at lower turnover.
Layer 2: what is coming
- Signed contracts or standing orders. A client who has committed to regular work is strong evidence.
- A pipeline of repeat customers. A short list of regulars with dates and amounts can help, if you can back it with invoices.
- A forward budget. A simple sheet showing expected income, costs and the car repayment shows you have thought it through.
Layer 3: what you did before
- Your previous employment. If you left a job in the same trade to go out on your own, say so. Payslips from that job show an earning history and a work ethic.
- Your credit file. Clean repayment history on other debts is reassuring. If your file has marks, our page on car finance with defaults explains how lenders weigh them.
- Your household. A partner with a steady income can strengthen a joint application. See joint car loan.
Sole trader, contractor or company
How you are set up changes what you provide, not whether you can borrow.
Sole trader. You and the business are the same legal person. The lender usually looks at your personal credit file and your trading record together. Business.govt.nz explains that a contractor is self-employed and responsible for their own tax, and that you should keep records of income and expenses.
Contractor to one client. If most of your income comes from one company, the lender may ask how long the contract runs. See car finance for contractors.
Company. The company is a separate legal entity with its own record. For a very new company, lenders may look at the directors’ personal position as well. Ask what a lender will require before you apply, and get legal advice before you put your own assets behind a company loan.
Personal or business loan?
Whether you buy the car for personal use or for the business affects how the loan is classified. Consumer Protection explains that a consumer credit contract is one where credit is given for personal use, and that contracts for commercial or investment purposes are excluded from the Credit Contracts and Consumer Finance Act, although protection against oppressive behaviour still applies. Lenders may ask you for a declaration.
Answer honestly. If the car is mostly for school runs and the weekend, it is a personal loan, whatever your tax situation. If it is a ute you use daily on jobs, the lender may treat it as a business loan. Our page on business vehicle finance goes through the practical differences. For GST and deductions, ask an accountant and read the Inland Revenue pages. We cannot give tax advice.
Choosing a loan you can carry through the first years
The first years in business are when money is most uneven, so the safest loan is a modest one.
- Choose a cheaper, reliable car. Reducing the loan reduces the risk for both of you. Our guide to what a car really costs to own lists the extras.
- Use a deposit if you can. It lowers the loan and the weekly repayment. A trade-in counts. See using a trade-in as a deposit.
- Be careful with a long term. A seven-year loan has a lower weekly cost but a much higher total, and you may still owe money when the car has lost most of its value.
- Avoid a balloon payment unless you understand the lump sum at the end. See the balloon payment glossary entry.
- Set money aside for tax. A tax bill that arrives after a quiet month can turn into a missed car payment. Inland Revenue says you become a provisional taxpayer if your residual income tax from your last return was more than $5,000, and then pay in instalments during the year. Ask an accountant how it applies to you.
A worked example (illustrative numbers only)
Say you have been a self-employed electrician for 14 months. Your bank statements show deposits of around $1,800 a week in the last six months, with costs of around $600 a week for materials, fuel, insurance and phone. You are looking at a $14,000 car and have a $2,000 deposit.
| Car price | $14,000 |
| Deposit | $2,000 |
| Loan | $12,000 |
| Illustrative rate and term | 16% over four years |
| Weekly repayment | about $78 |
| Total repaid on the loan | about $16,300 |
Your profit before tax is about $1,200 a week. After setting aside money for tax and living costs, a lender can see that $78 is a small slice. That is a more comfortable picture than borrowing $25,000 for a newer car on the same income. These numbers are made up. Real rates, fees and terms vary, and the repayment calculator lets you test your own.
Red flags
- A lender or dealer who tells you the figures are “no problem” before seeing your statements. Nobody can promise an outcome.
- A low-doc or alternative-doc loan with a very high rate. Some products trade fewer documents for more cost. Ask for the total repayable.
- A weekly figure with no total. Always ask for the total, with every fee.
- Add-ons rolled into the loan. Warranties and insurance raise the amount you borrow and the interest you pay.
- Pressure to sign today. A real offer will still be there tomorrow.
- Asking you to hide or inflate income. Never do this. A false statement on an application causes serious trouble later.
- A car with money owing on it. Do a PPSR check.
If the timing is not right yet
If a lender declines you, the answer may be “not yet” rather than “no”. Things that can change the picture in a few months:
- Another three to six months of bank statements
- Filing your first tax return and keeping it to hand
- Saving a deposit
- Paying down existing debts, which lowers your outgoings
- Fixing errors on your credit report. See how to get a free credit report.
MoneyTalks is a free helpline run by FinCap that can help you work out a safe weekly figure. Our page on financial mentors explains what the service offers.
How Fair Finance helps
Complete one online application and we run one soft credit check, which does not affect your score. We pass your details to our panel of approved lenders and show you the lenders that fit. You can then shop at any yard or buy privately. Each lender decides case by case, and nobody can promise approval. Start with the quick check or go straight to apply.
Checklist
- Three to six months of bank statements saved as PDFs
- Recent invoices and proof of payment
- First tax return or Inland Revenue summary, if filed
- GST returns if you are registered
- Contracts or standing orders that show work ahead
- Payslips or a letter from your previous job in the same trade
- Deposit or trade-in worked out
- Weekly ceiling that leaves room for tax
- Total repayable and every fee in writing
General information only, not financial or tax advice. Rules, rates and tax settings change, so check the official pages below.
Sources
Common questions
Do I need two years of accounts to get car finance as a sole trader?
No law sets that number. Some lenders like to see two years of tax returns, and others will look at less if the rest of your situation is strong. Lenders decide case by case, and nobody can promise approval.
Can I get car finance when I have been self-employed for only one year?
Possibly. One year of bank statements and a first tax return, combined with a deposit or a steady work history before you went out on your own, gives a lender something to assess. A smaller loan on a cheaper car improves the picture.
What if I have only just started my business?
With no trading history, a lender has little to go on besides your earlier employment, your savings and your credit file. Contracts, signed work orders and a few months of bank statements help. Some people wait a few months to build the record before applying.
Does my previous job count if I now work for myself?
It can. If you stayed in the same trade or industry, a lender may see your earlier income as evidence of your skills and earning pattern. Bring payslips or an employment letter alongside your new business records.
Should I buy the car through my business or personally?
That is a question for an accountant, because tax and GST treatment differ and we cannot give tax advice. It also changes how a lender classifies the loan, so be consistent about what the car is for. Our business vehicle finance page explains the difference.
Is a deposit really that important with a short trading history?
It often is. A deposit lowers the amount at risk, which can offset the uncertainty of a short track record. It also reduces your weekly repayment while your income is still settling.
See your repayments, then get a fair rate.
One application, one soft credit check, no obligation. We match you to the lender most likely to give you a fair go.