Even though many lenders have a length of employment criteria, you can readily get a car loan if you just started a new job.
Your length of employment is just one of four factors that banks consider when underwriting. The others are your credit score, DTI ratio, and the size of your down payment.
It is okay to fall short in one area (service time at your current post), provided you outperform in the three other measurements.
A new job is not a death sentence for loan approvals. You have to provide other evidence that you can repay the loan on time and according to terms.
How Long You Have to Have a Job
Your standing on three other critical qualifiers determines how long you have to have a job to get a car loan. Lenders do not knock out applicants based on one factor in isolation, such as a six-month length of employment minimum. Instead, they often consider the complete picture.
Your debt-to-income ratio, credit score, and down payment also influence whether you can get a car loan a month after starting a new assignment or by using an offer letter to verify income and employment.
A person with a very good (740 to 799) to excellent (800+) credit score can often obtain a car loan shortly after starting a new job. In this case, their exceptional payment record overshadows the substandard length of employment.
The minimum credit score needed for a car loan is not a fixed number. Lenders may still approve your application if your score falls below 740, even if you recently changed positions.
You have two other opportunities to make up for a recent career change by choosing a reasonably priced vehicle and making a substantial down payment.
A person with a low Debt-To-Income (DTI) ratio (less than 35%) does not have to have a job very long to get a car loan. In this case, your ability to afford the monthly payments balances the short employment length.
The DTI drives how pricy a car you can finance. Lenders calculate this crucial underwriting variable using a simple formula.
DTI = Monthly Debt Service/Monthly Income
The price of the vehicle that you are attempting to buy is a variable that you control. Choosing an economy car translates into an affordable DTI, whereas a luxury auto might not.
For example, look at the projected monthly payments for this small sample of choices assuming a 5-year term and 10% interest rate.
|Acura RLX Sport||$60,000||$1,275|
A person with a sizable down payment of at least 20% can often obtain a car loan shortly after starting a new job. In this case, your ability to save money over time demonstrates financial stability and overshadows the substandard length of employment.
On the other hand, a person with bad credit and no down payment would have difficulty getting approved for auto financing. You might have to resort to paying more at a buy-now-pay-later dealer where your choices are limited to high-mileage clunkers.
Length of Employment for Auto Loans
As mentioned, the length of employment required for an auto loan is just one of four critical factors that lenders consider. If you just started a new job, the chances are that you will fail the strictest requirements in this one area.
- Minimum of six months at the new assignment
- A work history of at least three years
- No long bouts collecting unemployment
Again, you can easily overcome a poor mark in this one criterion by performing well in at least two others: credit score, DTI, or down payment. However, the type of situation could influence the outcome.
You do not need to have a full-time job to get a car loan, but it does help – especially if you are just starting with a new employer. People working at least 35 hours per week earn more money than those working part-time, translating into a better DTI.
People who work 9:00 to 5:00, five days per week, make a full-time income and can more readily afford the monthly payment associated with an auto loan of a given size, interest rate, and repayment terms.
However, part-time workers can still manage an affordable DTI by purchasing a lower-priced vehicle. Also, a good credit score and sizable down payment make a difference yet again.
You may have to wait at least six months to buy a car after starting a temporary job – unless your credit score, DTI, and down payment place you in the easy to approve category.
All careers are temporary when you think about it. All face unemployment due to reasons outside of our control: layoffs when the economy sours or termination during disability or family leave. Plus, your employer can fire you at any time for cause.
Therefore, people recently hired through temp agencies can overcome the lack of a “permanent” full-time job with more extended employment history, no long gaps with unemployment, or solid performance on the other metrics.