Do Auto Lenders Verify Employment?
Auto lenders always verify employment. It is generally done by requiring a few of your most recent pay stubs. In some rare cases, they may call your employer for confirmation.
Why Do Lenders Verify Employment and Income?
Lenders want to see that you have the ability to repay the loan that you are requesting. By requiring you to show a few of your recent pay stubs, a lender can assess two important things. Number one is that you are currently employed, the second is that you have a consistent level of income. The combination of these two factors show that you have the ability to repay the borrowed funds, which is obviously of supreme importance.
What if You’re Self-Employed?
Providing proof of income and employment verification are simple if you are a salaried or hourly employee, but it becomes more difficult if you are self-employed. Lenders are still willing to offer loans to self-employed individuals if they can prove a consistent level of income. This usually takes the form of past tax returns. Whether you have been issued a W-9 or not, you will need to claim enough income on your tax forms to show that you can repay the loan.
What Do Lenders Want to See in Terms of Income?
In general, lenders want to see that you take home at least $1,200 before they will approve a loan, and at least one year of employment with the same company or three years in the same industry. Obviously, the more expensive the car you want is, the more income you will need to have. Another important aspect of the loan approval process is your down payment. It is in your best interest to have at least twenty percent of the purchase price as a down payment. This shows that you are committed to repaying the loan and reduces the amount of interest that you will pay over the life of an auto loan.