We receive many questions regarding whether taxi drivers can secure car finance. In short, the answer is yes. But it’s not as straightforward as financing a car for personal use. In this article, we’ll discuss the difficulties taxi drivers face when seeking car finance, the benefits of doing so, and how they can increase their chances of being accepted by lenders. Read on for our quick guide to car finance for taxi drivers.
While taxi drivers have the option to lease the car they use for work, many drivers prefer to actually own their car instead. This way they get to keep more of the money they earn and have more control over the vehicle in general. In the long-run, taxi ownership is usually the more financially sound option.
Car finance is an excellent option for taxi drivers wishing to own their car for a number of reasons. Firstly, monthly repayments are usually much more affordable than paying a lease. Secondly, it’s far more feasible than buying the car outright since doing so would require a large lump sum of money to be paid all at once. For most people, this would mean either significantly eating into their savings or taking out a loan in order to pay for the car. As such, many taxi drivers look to car finance as the most financially viable option – car ownership without breaking the bank.
It’s not always smooth sailing however, securing a car loan for a taxi can be more difficult than doing so for a vehicle intended for personal use. This is primarily due to the increased mileage the vehicle is likely to travel as a taxi. This means the car is likely to suffer more wear and tear and depreciate in value much faster than it otherwise would. The reason this makes it difficult for taxi drivers to secure a loan is that, in the event of missing a repayment or defaulting on the loan, lenders will typically use the remaining value of the car to reimburse themselves. If a car rapidly loses its value, then lenders are less likely to recoup their investment.
In simple terms, it’s a higher risk, and too high a risk for most lenders. That being said, there are some things that taxi drivers can do to prove that they aren’t a risky investment.
First things first, it’s important to choose an appropriate car. One that’s both affordable and suitable for the task of being a taxi – a car that’s very reliable and can perform well mile after mile. A car that will need to be repaired often will come with higher maintenance fees which may affect your ability to meet loan repayments, which won’t be appealing to lenders. Also, some people think that buying a car on finance is an excuse to find a more expensive car than they would otherwise be able to afford. While this may be true in many cases, when buying a car for use as a taxi, it’s important to be as sensible as possible to better appeal to lenders. You want to demonstrate that you are responsible and mature in your financial decision making, not an opportunist.
Secondly, you’ll want to ensure your credit score is as good as possible. A credit score is a reflection of your history with loans and repayments – it gives potential lenders an insight into your ability to manage your finances responsibly and helps them assess how much of a credit risk you are. As we explain in our dedicated blog post on ways to improve your credit score, there are a number of ways you can do this. They range from simple things like joining the electoral roll to more long-term methods such as using a credit card and paying it off on time to build your credit rating. Be sure to check out our blog for more information on credit scores and ways to improve them.
Here at Carfinanceplus.com, we specialise in helping those in difficult or uncommon financial situations secure car finance. We have an expert panel of lenders who consider applications from taxi drivers, those with bad credit, retirees, and everyone in between. You can find more information about your eligibility for a car loan here, or alternatively, fill in our simple online application form and one of our team will be in touch to help you at each step of the way.View more from The Car Finance Hub