How Coronavirus Could Impact Your Future Auto Loans

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - August 5, 2020

Of all the ways the world has been affected by the global COVID-19 pandemic, one thing that you may not be prepared for is how the disruption could impact your future needs – particularly, your next auto loan. The lasting effect of being laid off or furloughed still remains to be seen, but any interruption in work history could spell disaster for someone seeking a car loan, especially if that someone has a bad credit score.

Why Is Job History Important?

Work history is an important part of getting an auto loan with poor credit. As someone with a lower credit score, getting the car loan you're looking for most likely means going through a subprime lender. These lenders look beyond your credit score to see a broader picture of your finances and determine your creditworthiness.

Doing so means looking at many facets of your credit and financial profile, and the things in your life that affect it. These include your income, residence, and ability to make a down payment, which all influence the lender’s decision. These things let lenders see your ability, stability, and willingness to take on an auto loan.

However, some requirements lenders look at, like your work history, aren't simply a checkbox to tell them if you have a job. Your work history tells lenders important information, and when they read through it, they're trying to answer these questions:

  • Are you reliable?
  • Do you have general stability?
  • Do you move around a lot?
  • Are you willing to see things through?
  • Will you remain employed throughout the term of your car loan?

Subprime lenders want to have confidence that the borrower takes their auto loan obligations seriously. The more stable, long term, and consistent your work history is, the better your situation may look to a lender who's judging your creditworthiness.

Work History Scenarios to Consider

Consider this: Jane works for a few months at a retail clothing store and decides it's not for her. After looking for a job for a little over a month, she starts selling yachts. Jane doesn't see it as a big change – after all, she's still in retail. Then, after almost a year, Jane changes tracks completely and becomes a life insurance agent. Sure, she's still selling things, but selling life insurance is a far cry from a clothing store.

Here's another scenario for you: John starts a job as a lab assistant, where he labels test tubes and records results. After six months, he's asked to help out at a lab in a neighboring state. He moves for work, and is taking on more responsibilities in his new role. After almost a year of doing this, John changes positions again to work in the main lab for his employer, which requires another move across the country to work closely with a new team.

In both scenarios, the borrower is working for around a year and a half, and has had three different jobs. However, lenders may not consider these borrowers for a car loan in the same way.

How Subprime Lenders View Work History

Typically, a subprime lender requires a total work history of around six months or one year at a single job. If you don't have this, they're typically willing to dig a little deeper, and may base lending decisions on a three-year work history with no long gaps in employment. An employment gap is typically considered to be any period of time where you're without work for 30 days.

If you're in Jane's scenario or something similar, a lender may not offer you an auto loan based on your employment history. Even though she continued to work in retail for her first two jobs, they were for different companies; her first retail job didn't last to the six-month mark, and there's a gap of more than 30 days between her first two jobs. All these things could count against her when the lender is evaluating stability.

When you're in a scenario like John's, it may seem like you're taking on a new job with each move, but subprime lenders know how to tell the difference between moving for a job and moving to a different job. If you're working for the same company, or in the same line of work, they're usually more willing to consider work history over job location.

Coronavirus Considerations for Job History

There are some cases where a subprime lender may consider differing circumstances, since everyone's situation is different. To help the subprime lender get you through the process, be honest and up front about your credit situation and work history. With the upset of COVID-19, there are millions of American’s wondering how their work history gaps are going to impact their car buying ability.

If you're furloughed or laid off due to the coronavirus pandemic, but have a solid work history of at least three years, some lenders may ignore the missing time on the job. This varies by lender, though, and how this situation is dealt with may not be the same for everyone.

For example, if you worked at the same restaurant for five years, were furloughed during the shut down, and then brought back when your place of employment reopened, you're more likely to be considered for an auto loan due to situations beyond your control.

On the other hand, if you never kept a solid work history, or only worked a few part-time jobs before the pandemic hit, lenders are likely to conclude that your work history isn't strong enough, even without the fact you weren't able to look for work due to COVID-19.

Finding a Post-COVID-19 Car Loan

Whether it was the coronavirus pandemic that put a kink in your work history or not, lenders need to know. With extenuating circumstances in play, some subprime lenders may go above and beyond to help you get into the car loan you need. This may not always be the case, however.

If you need vehicle financing now, it's worthwhile to apply with someone that can look beyond your credit score and really see your situation. You could waste a lot of time and effort looking for the right dealer if you don't know where to go. Or, you could start right here with us at CarsDirect.

We work with a nationwide network of special finance dealerships that are signed up with subprime lenders who know how to help. To get started on the path toward your next auto loan, fill out our free and easy car loan request form. After you do, we'll get to work matching you with a local dealer!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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