In PE, what should I know about self-employed borrowers for car loans?

For self-employed borrowers seeking car loans in Prince Edward Island, lenders require robust documentation to verify stable and sufficient income, which is often more complex than for salaried employees. Typically, you'll need to provide at least two to three years of personal tax returns (T1 General, focusing on Line 15000 for total income) and corresponding Notices of Assessment (NOAs) from the Canada Revenue Agency. If incorporated, corporate tax returns (T2) and detailed business financial statements will also be essential to demonstrate profitability and cash flow. Furthermore, recent business bank statements (3-6 months) are crucial to show consistent income deposits and manageability of expenses, alongside proof of business longevity.

Why this matters: Lenders perceive self-employment as carrying a higher inherent risk due to potential income fluctuations and the common practice of maximizing tax write-offs, which can significantly reduce declared taxable income. In the current Canadian market environment, potentially extending into 2025, lenders are scrutinizing income stability even more closely. Consequently, self-employed applicants should anticipate potentially higher interest rates or be prepared for a larger down payment to mitigate the lender's risk. A strong personal credit history and a clear demonstration of consistent income will significantly strengthen your application. While the core requirements are national, always confirm any specific provincial consumer protection regulations or tax implications relevant to vehicle financing in PE.