Can you get a car loan with a new job?

It is possible to get a car loan if you’ve just started a new job, though you may need to take some extra steps. Lenders typically prefer borrowers with a history of steady employment, so if you’ve been job-hopping, you may need to prove you’re a reliable borrower.

How does your job affect your car loan?

Banks and other credit providers typically prefer to lend money to “ideal” borrowers – those who can comfortably afford a loan’s repayments, and are unlikely to default. Lenders assess loan applications based on a range of different factors, including your credit score, income and expenses, including other debts. 

Car loans don’t usually verify employment by contacting your employer, so you’ll typically need to provide payslips and the like to prove your income. Having a high income may not matter as much as you think – a lender may instead prefer a regular income. For example, even if you earn a high income through freelancing or commissions, a lender may prefer a customer earning a consistent wage, as this income is less likely to fall through due to circumstances beyond your control.

If you’ve just started a new job, a lender may not be willing to approve a car loan application until they’re confident you’ll stay in the role and keep earning a consistent wage to keep up with the loan repayments. The longer you’ve held a job, and the more proof you can provide of earning a consistent wage, the more willing a lender may be to lend you money for a car.

For a full-time role, you may need to have held your job for at least 6 months and/or have passed the employer’s probation period before a lender will be satisfied. A lender may want you to stay in a position for longer if your employment is not full time. For example, you may need to have held a casual job for at least 12 months, or be self-employed for at least 2 years, before a lender will be confident enough to provide a car loan.

How to get a car loan with a new job

It’s not impossible to get a car loan with a new job, though you may need to take some extra steps to demonstrate that you’re a reliable borrower. Different lenders may have different requirements, though some common options include:

Provide your employment history

If you can show a lender that you’ve been consistently employed in the past, they may be more willing to overlook that you’ve recently started a new role.

If you’ve started a new job that’s like your previous long-term role (for example, if you worked as an accountant for many years, then took a new job with a different firm), a lender may feel more confident you’ll stick around following the probation period. Though this may be a different story to if you switched careers entirely, such as going from an accountant to a landscape gardener.

You’ll generally need to show you’ve previously worked in the same kind of role for at least 12 months, and have had no gaps in your employment, for a lender to be satisfied.

Pay a deposit

Unlike home loans, many car loans don’t require you to pay an upfront deposit when applying. However, if you’re able to do so, this can provide the lender with some extra financial security that could hopefully help to offset any concerns they may have around your new job.

Buy a relatively low-risk vehicle

Many car loans are secured by the value of the car being purchased. This means that if you default on your repayments, the lender can repossess and sell the car to help recover the rest of the money they’re owed.

However, this means that some lenders limit the types of vehicles you can purchase with a car loan, to help better ensure the car retains enough value to secure the loan. For example, a lender may only let you buy new cars, or used cars under a maximum age limit, to reduce the loss of value to depreciation over the loan term.

To help lower the lender’s risk and offset any concerns about your new job, you could consider avoiding cars that aren’t likely to fulfil the lender’s preferred criteria, such as older used cars. Of course, this means potentially missing out on the generally lower prices for these vehicles.

You could also consider applying for an unsecured car loan, which typically has fewer restrictions around what vehicles you can buy as they don’t require collateral. That said, unsecured car loans often have higher interest rates, and you may still need to provide extra support around your new employment.  

Improve your credit score

A good credit score indicates to a lender that a borrower is a relatively safe risk, and is unlikely to default on their loan repayments. Credit scores are based on your history of borrowing and repaying money, as recorded by credit bureaus. If you’ve successfully applied for and repaid loans in the past, and regularly pay your bills on time, you’re more likely to have a good credit score. But if you’ve missed payments or defaulted in the past, you may have bad credit.

It's still possible to get a car loan with bad credit, though you may need to take extra steps to prove you’re a reliable borrower. And if you’ve just started a new job with bad credit, getting a car loan could prove especially challenging. Before applying for a car loan, you could consider taking steps to improve your credit score, such as paying off outstanding debts and practicing good credit behaviours.  

Clear your debts

Your debt to income (DTI) ratio can be a concern for lenders when you apply for credit. If you already owe money on personal loans, home loans or credit cards, and your income may not be enough to service the repayments on another loan, a lender may be reluctant to approve your application.

If possible, you could consider paying off any outstanding loans and lowering your credit card limits or cancelling your cards altogether before you apply for a car loan with a new job. This can help to lower your debt-to-income ratio, so the lender feels more confident that you’ll be able to keep up with the repayments.

Prove your savings

If you’ve recently started a new job, or are employed in a casual position, the lender will want you to provide some evidence that you could still afford the car loan even if your employment ended or changed. You could provide a lender with bank statements and the like to demonstrate that you’re responsible with money. If you have savings available in a savings account or term deposit that you could potentially turn to in a financial emergency, that could also help to reassure a lender.

For small businesses owners and other self-employed borrowers, a lender may also ask for tax information and business statements to support your car loan application.

Get a guarantor

Similarly to home loans, you may be able to get a family member to guarantee your car loan with the value of an asset they won, such as equity in a property or savings in a term deposit. If you were to default on the car loan repayments, the guarantor would then become responsible for the debt you owe.

Becoming a guarantor is a big responsibility, and can affect the guarantor’s finances and credit score. Make sure that all parties involved are aware of the risks and responsibilities before signing up.

Contact a broker

Much like a mortgage broker, car finance brokers are familiar with the car loan eligibility requirements from a range of different lenders. After looking at your personal financial situation, a broker can recommend car loan options that may suit your needs, even if you’ve recently started a new job. Plus, the broker can often manage the application paperwork and even negotiate with the lender on your behalf, to help you get a deal that suits your needs.

Compare car loans in Australia