More than 20% of the Australian workforce is casually employed. This can often mean fluctuating work hours and no personal leave entitlements.
Both can make take-home income hard to predict and make it more difficult to get a car loan.
There are plenty of lenders who lend to those with casual income but there will be some additional criteria to meet.
In this article, we will discuss why lenders treat casual employment differently and what you can do to present your car loan application in the best way possible.
In This Post:
Will Lenders Consider Casual Income?
Lenders will consider casual income when assessing you for a car loan as long as you meet the minimum requirements for employment tenure.
You also need to earn enough to afford the additional repayments once you are approved for the loan.
Not all lenders will be available to you depending on your specific circumstances.
For example, some banks and larger lenders will have longer tenure requirements and some may not consider casual income as reliable enough.
However, there are plenty of non-bank lenders who frequently lend to those who are employed casually.
Why the Difference Between Lenders
Each lender has their own way of assessing risk and the pricing of their car loan products is often a good guide to how risk-averse they are.
Banks and Credit Unions often have the best interest rates on a car loan, but will also have strict minimum requirements for income, credit score, and sometimes employment type.
Non-bank lenders are often more flexible with their criteria to a varying degree and can accommodate a broader range of customer scenarios.
However, the interest rate is usually a little higher.
Our brokers can help match you with a lender who is willing to accommodate your situation as a casual employee. Click on the button below to get in touch with our expert team today.
Why is Casual Employment Treated Differently
Your employment status is an indicator of how reliable your future income may be.
A full-time employee is paid a flat salary that is predictable month after month and has additional job security mandated by law.
Compared to casual employment where your hours may fluctuate week to week and you could let go without notice in some circumstances.
This is why there are additional criteria that you will need to satisfy to be approved for a car loan when employed casually.
Consistency of Income
If you can demonstrate consistent income over a long period of time then lenders will be able to assess your capacity to repay the loan with far more accuracy.
Earnings that fluctuate regularly may indicate you are a higher-risk borrower.
Personal Leave Benefits
Full-time employees receive paid leave and sick days which ensures consistent earnings and a financial safety net.
According to the ABS, there are 2.6 million workers who are not entitled to any leave benefits. Casual workers are entirely reliant on the hours worked to generate their income.
The lack of leave entitlements will lead to lower earnings when falling ill. This is something lenders may factor into their decisions.
Minimum Requirements for Casual Employees
Before you apply for your car loan you will need to meet the following minimum requirements.
Three Months in Current Job
The longer you are in your current job the more options will be available to you.
However, the shortest required tenure for casual employment on our lender panel is three months. So if you have just started a new job then get in touch with Gusto Finance today to discuss your options!
Proof of Consistent Income
The more consistent your income the easier it will be for a lender to calculate your average earnings.
Lenders have a responsibility to only give loans to those who can afford to repay them. So they may calculate your assessable earnings to be less than the average if the fluctuations are significant.
You will be required to submit 90 days’ worth of bank statements to evidence your income. So there is no hiding from inconsistencies.
Minimum Earnings Thresholds
Some lenders may have a minimum income requirement for casual employees.
However, if you can afford to repay the loan in addition to your existing expenses then you will generally be ok.
Improve Your Car Loan Application While Working Casually
Your employment type is only one factor that a lender will consider as part of your application.
You can give yourself the best chance of being approved by demonstrating positive financial habits elsewhere.
Make Sure Existing Loans Are Up to Date
If you are currently in arrears on any loans then no lender will approve a car loan for you.
You must be up to date before applying. Even if you have only just recently caught up on your arrears, you will have options.
But zero if you are still behind on your repayments.
Short Term Loans
Any type of wage advance service, or payday loan, is going to be a sign that your casual income is not reliable to support your regular budget.
People use these services to plug short-term holes in their finances and is not a sign of reliability – which is what lenders need in order to approve a loan.
Avoid both types of loan products at all costs if you plan on applying for a car loan.
Do Not Rely on BNPL
Frequent use of Buy Now, Pay Later services can be a sign you are not able to afford your current lifestyle and make lenders wary of your financial habits.
The problem with these services is it is hard to know how much you really owe. The lender may have to make an educated guess that could lead you worse off than the reality.
No Payment Reversals on Bank Statement
Payment reversals are a sign that you are not keeping up with your existing expenses and you may not be ready to take on an additional loan.
Avoid any reversals appearing on your bank statement across the 90 days to ensure this is not a negative in your application.
Save a Deposit
Saving a car deposit will have two effects on your application.
- It will demonstrate that you have surplus funds in your budget to afford the repayments on your new car loan, and;
- You can lower your loan size relative to the value of the car you are buying.
Having skin in the game creates a buffer in the value of the car vs the size of the loan, and lowers your repayments. Lenders will view this favourably.
Conclusion
Not all lenders treat casual employment in the same way and selecting the right lender for your car loan application may be the difference between being approved or not.
Our brokers live and breathe this stuff every day! So click the button below to submit an inquiry and we will get to work to help you find the best match for your situation.
