How to qualify for a car loan when you’re self-employed in the music industry

Many musicians and those working in the music industry are considered a risk factor by banks and lenders when it comes to seeking a car or a vehicle loan.

In many instances, this means you are probably hit with higher interest rates and have specific application and qualification requirements, but loan brokers such as Savvy are of great help through this maze.

Their consultants analyse your financial position and what documentation you can provide, and point out car finance options to obtain a car loan.

Make a Savvy Choice

A reputable broker has several advantages over a traditional lender. Savvy deals with more than 25 lenders, which makes for a far more competitive loan provider environment and can result in cheaper commercial interest rates.

Bill Tsouvalas, Savvy’s CEO & managing director, says this competitive environment and up-to-the-minute market knowledge gives Savvy superior insight.

“Banks, by comparison, only represent themselves, so borrowers would have to compare each bank and lender individually,” he explains.

“Savvy is also on the side of borrowers and specialises in helping people qualify for finance who might otherwise find it difficult.”

Self-Declaration & Low-Doc Car Loans

Self-employed musicians have several options when it comes to seeking car finance.

One such option is a self-declaration car loan, which is a hassle-free flexible commercial product predominately for business use.

In most cases, borrowers are only required to provide basics such as privacy consent, an application form and proof of identity to start the process.

Those whose income or employment is not steady could consider a low-doc car loan, a form of Chattel mortgage, where the car itself acts as security on the loan.

“A low-doc or self-declaration car loan is a type of finance where lenders do not require as many documents as when you apply for a standard full-doc commercial application,” Tsouvalas says.

“Documents like your last two years’ worth of completed tax returns and financial statements are not required.”

How Does This Help a Self-Employed Muso? 

Such loans can present ongoing tax and GST benefits. GST on the purchase price can be claimed back in the next BAS, instead of over the course of the loan.

Professional musicians require an ABN that has been active for two years or more and must be registered for GST.

Hobbyists on the other hand may qualify if they can contribute a 20% deposit or have alternative employment and income.

“In all cases, being a property owner will strengthen the borrower’s profile as this demonstrates past ability to repay debt,” advises Tsouvalas.

“In each instance, a deposit of 20% can enable them to qualify.”

If you’re not asset-backed, having a large cash deposit for the sale can substitute this. If you fall outside of standard low-doc car loan guidelines, there are still many options available.

But lenders may want to see further information such as a declaration of your business income, a letter from your accountant confirming the projected income, six months’ worth of trading bank statements and BAS returns for the last two quarters.

New vs Used Cars

The big thing is to do your homework. There are pros and cons if you consider a new or a used car.

The interest rate will be lower on a new car, though the total price of a used car will be lower.

New cars come with a warranty, but second-hand dealers can provide up to a two-year warranty. Checking on this is important when knowing which path you’re going to go down. If you do decide to go with a used vehicle, be sure to do your due diligence – private sales should be checked on the Personal Property Security Registrar to ensure there are no outstanding associated debts.

“Buyers will have greater bargaining power if they are pre-approved for a certain loan amount,” Tsouvalas suggests.

“They know how much they have to spend and can haggle down to that limit. Using dealer finance may seem appealing, though it is easy to get stung with a higher interest rate.”

Check out different car brands. Some have lower repair and servicing costs as well as cheaper spare parts.

If your make and model can only be serviced by a brand representative workshop, it will cost more, and it may be better if it’s able to be serviced and repaired at any mechanic.

And finally, avoid extras. Things like window tinting, protective coating and dashboard covers are quite unnecessary.

So don’t let the idea that musicians are off-limits for car finance stop you from hitting the road. There are plenty of options out there, and Savvy is here to help.