By Taylor J. Kovar – CEO/Founder, Kovar Wealth Management

 

Hey Taylor – I need to buy a car but don’t currently have income (job will come once I’ve got wheels!). I have really good credit and I’m wondering if I can make this work without getting swindled by the lender.

 

Hey Jason – This feels like a tale as old as time. You can’t work without a car, but lenders don’t want to give money to someone who isn’t already working. It can be done, and good credit is important, but you should make sure to explore every option before taking on a loan.

 

  1. Look local. It’s not risk-free, but buying a used car from a friend or family member might save you a lot time and money. If this car really will guarantee you work, you can get away with an older vehicle that gets you to and from your new job enough times to earn a paycheck and provide proof of income for a future car loan. Ask around, post about it on Facebook, check the public boards in coffee shops—make sure to exhaust your neighborhood search before you go to a dealership.
  2. Build up your downpayment. A good credit score usually helps people avoid paying too much up front, but without proof of income, you might need to put a significant amount of money down to keep your interest rate and monthly payments respectable. Since you’re currently without work, saving up a big chunk of money might not be an option. If you don’t already have the cash reserves, maybe a family member can float you a small amount to be paid back as soon as you start the new job. Good credit is important, but lenders will probably be a little wary of you if you have no income and can’t put meaningful money down.
  3. Go through a bank. There are a lot of horror stories of people not seeing proof of approval from the dealership, then finding out later the terms of the loan were different and much worse than expected. If possible, getting approved for a loan through a third party bank will take the uncertainty out of the equation and protect you from any predatory practices. Banks aren’t all that eager to lend to someone with no proof of income, but it might work if you already have a relationship with that business.

 

You’re not in an enviable situation, but I’m sure you can make the best of it. Just be thorough in your car search and stay away from any lender who’s not willing to be fully transparent with you. Good luck, Jason!