How Do Car Dealerships Verify Income? A Complete Guide

People who want to get auto loans at a car dealership will look at your income as one of the most important things. The dealer will check your income to see if you can get the loan and to see how much they are willing to lend you. So how do car lots check and confirm that you can afford the car when you apply for financing?

There are several methods dealerships commonly use to verify applicants’ income when financing a car purchase These include

Reviewing Paystubs

Paystubs from the last few months are one of the easiest ways for a dealership to confirm your income. Paystubs are proof of how much money you make and how often you get paid.

Dealers will typically request 2-4 of your most recent consecutive paystubs. Some may ask for a full month’s worth. This allows them to:

• Confirm where you work and that the income listed on your application matches your paystubs
• See any trends in hours worked and pay over a period of time rather than just one snapshot
• Calculate your year-to-date earnings and estimate your annual income

When providing paystubs, make sure sensitive information like your social security number is blacked out. Also be prepared to explain any fluctuations in income or hours.

Calling Your Employer for Verification

Many dealerships will call your employer to confirm that you are working and making money in addition to looking at your paystubs. This adds an extra level of security and stops any possible fraud.

When the dealer calls your employer, they will typically just be confirming basic information like:

• Dates of employment
• Job title and type (full-time, part-time, contract, etc.)
• Salary or hourly pay rate

Some employers have dedicated phone lines or third party services for these types of employment verifications. Others may require the dealer provide written request on company letterhead.

Be sure to let your employer know that the dealership may call to verify employment information so they are expecting the inquiry.

Requesting Bank Statements

Your bank account statements can also give insight into your financial situation and recurring income deposits.

While paystubs show your income for a short recent period, bank statements provide a broader view of your savings, spending patterns, and income deposits over time.

Dealers may ask to see 1-3 months of bank statements. This can help them confirm and feel assured that your income is consistent and sufficient for the auto loan payment.

Just like paystubs, be sure to black out or omit any sensitive information on your bank statements before sharing with the dealer.

Using Third-Party Verification Services

A lot of auto dealerships and lenders use third-party verification services to make sure that applicants are working and making enough money. These include services like The Work Number, RapidFinancial and Certifix.

These agencies have access to income data through payroll providers, government agencies, and other authoritative sources. The dealer simply provides some of your key identifying information and the verification service reports back income information.

This allows the dealer to validate your income quickly without contacting your employer directly. However, you will likely still need to provide documents like paystubs.

Verifying Self-Employment Income

If you are self-employed, the dealership will need to see documentation that shows your business’s revenues, expenses and net income.

Typical documents dealers request from self-employed applicants include:

• Recent tax returns – These will include your Schedule C showing the net income from your business. Dealers will likely want to see returns from the past 2 years.

• Recent bank statements – These give insight into the regular income deposits and money flowing into your business. About 2-3 months’ worth is standard.

• Business financial statements – Profit/loss statements and balance sheets help verify the business’s performance.

• Business licenses – Required licenses demonstrate that you are operating a legitimate registered business.

Providing several forms of documentation is key when self-employed since tax returns alone don’t necessarily show current, ongoing income stability.

Factors Beyond Income They Assess

While verifying your income is crucial, dealers will also look at other factors related to your finances including:

• Debt-to-income ratio – They calculate your total monthly debt payments divided by gross monthly income. Most want this below 50%.

• Credit score – Your credit score gives insight into your past repayment history. Prime scores usually start around 660.

• Down payment – Larger down payments signal you are financially invested in the purchase and able to cover more of the vehicle’s cost.

• Co-signer – Adding a creditworthy co-signer with verifiable income may help offset any issues or shortcomings in your application.

So while you do need to be prepared to confirm your income, having other positive financial factors can help strengthen your case for financing approval.

Streamlining the Income Verification Process

Coming prepared with the requested documentation can help make the income verification process quicker and simpler when financing through a dealership:

• Inform your employer they may get a verification call/form.

• Gather 2-4 of your most recent, consecutive paystubs.

• Print your recent bank statements.

• Calculate your debt-to-income ratio ahead of time.

• Know your credit score.

• Prepare the proper business financial documentation if self-employed.

• Consider adding a co-signer if your income or credit score are marginal.

Having all your financial data organized shows you are a serious buyer ready to move forward. This can minimize delays so you can quickly get approved and drive home your new vehicle!

Summary

• Car dealerships will verify an applicant’s income when financing to assess loan qualification and risk. This is done by:

• Reviewing recent paystubs to confirm employment and income

• Calling your employer to verify employment details

• Requesting bank statements to check income deposits

• Using third-party verification services that check employment databases

• Reviewing tax returns, financials, and licenses if self-employed

• While income is crucial, debt, credit score, down payment, and co-signers also factor in

• Preparing all your financial documentation upfront can help streamline the verification process

Following these best practices when applying for auto financing at a dealership can help ensure your income information is accurately validated. This will put you in a strong position to get approved for a loan so you can drive off in your new car!