Car finance on a pension or part-time income

Which income lenders will actually count

Assessable income is broader than many people assume. The Age Pension and the Disability Support Pension are stable, government-backed and predictable, which is exactly what a lender wants — several will assess them as primary income.

Part-time employment counts too, and permanent part-time is viewed more favourably than casual because the hours are contracted. Superannuation drawdowns, annuities, and rental income are all assessable with most lenders, though each has its own documentation requirements.

What varies is the mix. A lender may accept pension income but require it to be supplemented, or set a minimum total income that a single pension alone does not reach. This is precisely where comparing across a panel matters more than approaching one bank.

• Age Pension and Disability Support Pension
• Permanent part-time employment income
• Superannuation income streams and annuities
• Rental income, usually assessed at a discount
• Carer payments, accepted by some lenders

Affordability on a fixed income

Where income is fixed, a lender's affordability assessment is stricter, and reasonably so. There is no prospect of a pay rise absorbing a repayment that turns out to be too high, and less capacity to absorb an unexpected expense.

Expect close attention to your existing commitments, and expect the assessment to leave a genuine buffer. If that produces a smaller loan than you hoped for, it is worth treating that as useful information rather than an obstacle — the number is derived from what the income can actually carry.

Loan term against a fixed income

Term choice deserves real thought here. A longer term lowers the monthly repayment but extends the commitment and increases total interest. On a fixed income, the certainty of a smaller payment can be worth more than the interest saving from a shorter term — but only up to a point.

It is also worth thinking about the vehicle's age against the term, as covered in our guide to financing older vehicles. Committing to a seven-year loan on a car that will need substantial work in year four is a poor combination whatever your income.

Getting around Hobart, and what the car is actually for

Public transport in Hobart is limited compared with the mainland capitals, and much of southern Tasmania is difficult to reach without a vehicle. For a lot of people here a car is not discretionary — it is access to medical appointments, family and services.

That is worth stating in an application. A modest, reliable vehicle bought for clear practical reasons is an easier assessment than an unexplained larger purchase, and lenders do take the purpose into account.

Common questions

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