Getting a car loan in retirement is just as easy as getting a loan while working. Your loan will be assessed based on the same criteria as a person’s who is still in the workforce: income, credit, down payment.
Criteria 1: Income
The first consideration will be your income. Not only how much you make, but how much of it is going out in other payments. Lenders want to see that your total payments, including the new loan payment, will not exceed a set percentage of your after tax income. Depending on the lender, that percentage may be anywhere between 30 and 50 percent. For non-retired persons, lenders like to see one year of employment at the same job, or three years in the same industry. This demonstrates stability. Fortunately, most retirement income is fairly stable. However, it is typically reduced compared with what was being earned while you were still a member of the workforce. Lenders typically require a pre-tax monthly income of $1500-1800.
Criteria 2: Credit
Next on the list is credit history. If you have had excellent credit for many years, getting a loan in retirement ought to be easy; especially if you have built a relationship with a specific lender over those years. On the other hand, if you have bad credit, a score under 620, you are going to have to look for a specialty lender. You may have to look to a credit union or online to find the right lender. Of course we recommend our services, as we match our clients to a lender or dealer who finances retirees, even if their credit isn’t perfect. Go here to apply online and speak with a vehicle finance specialist.
Criteria 3: Down Payment
One other consideration is going to be your down payment. Someone with an excellent credit rating will only need about 10 percent down. Some one whose credit score falls between 675 and 720 may need around 15 percent. People with credit scores between 620 and 675 may be looking at 20-25 percent down. Under 620 and you may need as much as 50 percent down, depending on how low your actual score is. If you already have an existing vehicle, you could trade it in for a cash allowance toward your down payment. On the other hand, if you’re willing to put it in a bit more effort, you can often get a bit more for your used car or truck by selling it yourself to a private party, then using the proceeds for your down payment.