Get an Auto Loan Quote

Do Car Dealers Verify Income?

Car dealers do not verify income, lenders do. Lenders will verify your income for every loan. Why? It’s simple:  they need to ensure that you have sufficient income to make the payments on a given loan, however much those payments may be. They also compare your income to your existing debt payments–such as other car loans, mortgage, minimum credit card payment, etc–in order to get a clearer picture of your overall finances and determine your debt-to-income ratio. Again, the idea here is to make sure you are in a suitable financial position to take on a new loan. After all, if you are not, you will be a much greater risk of default, which will inevitably cost the dealer money–and decimiate your own credit in the process.

How is Income Verified for Auto Loans?

Your income can be verified in several ways. The most common is that you will be asked to furnish several recent paystubs, those tear-offs given to you by your employer with each check. These are a standard thing to provide to consumers, even if they get paid via direct debit. If you do have traditional paystubs, then you may be asked to furnish your latest income tax return. This is typical among people with certain types of jobs or employment, such as contractors, freelancers, sole proprietors, and small business owners with a single entity LLC.

A few lenders may be willing to accept bank statements showing consistent cash flow as an alternative form of income verification. If you cannot verify your income to the satisfaction of a lender, you may need to find a co-signer. The lender will then verify the creditworthiness and income of the co-signer. However, keep in mind that any co-signer is taking on nearly an equal responsibility as the primary borrower, and if the primary borrower misses payments or defaults, the person who co-signed the loan will be legally and contractually obligated to pay it off.

You may need to look online for a specialty lender who has looser lending guidelines to find the loan that you need. You will want to try these lenders before resorting to a buy-here-pay-here dealership, which has all kinds of well-known disadvantages.