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Auto finance for the self employed

4 points you should know as a self-employed person when buying a car:

4 points you should know as a self-employed person when buying a car:

The financing of a car purchase is different for self-employed in many ways than for the exclusively private car driver. In the following blog post you will learn which aspects you need to pay particular attention to.

The applicant’s credit rating determines the financing conditions

 

A bank treats a car loan or car loan like a loan transaction. The solvency, creditworthiness and creditworthiness of the applicant are checked in advance and decide – as with normal credit – whether and on what terms car financing is offered. The bank’s primary concern is to assess the solvency of the applicant in order to reduce its own risk. The following are usually checked as part of this evaluation process:

  1. Incoming payments to the business account
  2. a business evaluation (BWA) or similar financial document
  3. the latest income tax notices requested.

In addition, the applicant has to specify exactly what the car is used for, because it can make a difference in financing whether a car is only used for private or business purposes.

High down payments have a positive impact on creditworthiness

High down payments have a positive impact on creditworthiness

A deposit, regular credit installments and a final installment are usually agreed upon as part of the application. The final and final amount can usually be chosen as a self-employed person. It should be noted that the amount of these amounts also affect the rate. You have to decide for yourself whether you want to pay a lot at the beginning or only pay off a lot at the end of the term (“balloon loan”). If your own business has an ongoing cash flow, you can serve even a higher rate well. If you had to save longer and want to minimize your personal risk, a larger down payment is certainly more sensible. The latter variant is also advantageous for the applicant’s credit rating.

Vehicle leasing with so-called “three-way financing”: Useful, but expensive

Some providers of car financing for the self-employed also offer vehicle leasing. For example, there is “three-way financing”, which enables the vehicle to be returned at the end of the term. Alternatively, after paying the monthly loan installments, you can negotiate a suitable follow-up financing or pay off the final installment entirely. The three-way financing is particularly flexible for the self-employed. However, the providers also pay well for this return option, as you can usually notice when examining the total costs of the leasing. Flexibility is often priced at correspondingly higher rates.

The self-employed can deduct leasing costs from the tax

The self-employed can deduct leasing costs from the tax

Another aspect of vehicle financing for the self-employed is the tax impact of buying a car. Usually, the purchase price can be offset against input tax. Another option is depreciation, which reduces taxable income accordingly. Interest or leasing costs can also be deducted from tax.

If you are a self-employed person and want to know how good your credit rating is and how you can improve it in advance of a financing request, you can find out free of charge about the credit rating check at BankenScore.de. Simply check online, optimize and receive better loan offers.