Applying for a Car Loan on Centrelink Payments

How To Get a Car Loan on Centrelink

Getting a car loan when you’re on Centrelink can be tricky and daunting: on the one hand, you (probably) need a car to get to job interviews or work but on the other hand, Centrelink income might not support a car loan.

It can be a catch-22.

Quick facts:

• Some Centrelink income forms can be accepted as income towards a car loan
• You’re more likely to get approved for a car loan if your Centrelink income is supporting other forms of income like a part time job
• You can still get a car loan if you don’t have employment
• Youth Allowance and Job Seeker (formally Newstart) can not be used to service a loan
• Getting approved for a car loan on Centrelink depends on your living costs and financial history too

Which types of Centrelink payments are considered?

The type of government benefit you receive will determine if it can be counted towards a car loan.

Centrelink payments that can be accepted by lenders include:

• Age Pension
• Carer’s Allowance
• Disability Pension
• Child Support Payments
• Family Tax Benefits or Parenting Payments
• Overseas Pension
• Veteran’s Pension

Note that there are many kinds of Centrelink payments, each with different conditions. If you don’t see your form of income on the list above, give the team a shout on 1300 769 384.

We’ll be able to tell you within minutes (sometimes seconds) whether you qualify for a car loan – finding out is a huge help.

Youth Allowance, Austudy and Job Seeker aren’t accepted for car loans because these payments are considered for living expenses like food and utilities so adding loan repayments on top can be a real struggle.

Can you afford a car loan on Centrelink?

To qualify for a car loan on Centrelink payments, you’ll need to demonstrate your capacity to make repayments. This means having enough surplus money each pay cycle to support new loan repayments.

To demonstrate this, most lenders (eg. banks) require three months of bank statements and look for a remaining surplus each pay cycle that can be used to service a car loan.

This is the primary hurdle that you need to cross in order to get car loan approval.

Top tips

• Give yourself enough time (at least three months) to polish your bank statements and show remaining surplus. This will show you have the income to support car loan payments
• If possible, save up a little for a deposit or even a bit of a reserve in the months leading up to applying for a car loan
• A little extra money, even if you don’t use it for a deposit, can come in handy for things like registration, stamp duty or other costs when you buy a car
• A period of three months is recommended to get this done
• Avoid large or regular cash withdrawals, glambling or taking on more scheduled payments like streaming service subscriptions in these three months

Example: A car loan on Centrelink

Situation
A Centrelink recipient is working two shifts per week at a local supermarket. She receives Carer’s Allowance and Family Tax Benefits.

To expand her employment opportunities, she needs a car.

Preparation
In the months leading up to applying for a car loan, the Centrelink recipient avoids any cash withdrawals and keeps any frivolous spending to a minimum. This not only keeps her bank statements clean but also results in some extra savings.

Approval for a car loan on Centrelink
With her clean banking records, the applicant gets approved for $8,000 which both her part time supermarket work income and Centrelink income will help repay.

Result
Once approved, the Centrelink recipient purchases a small, reliable car which means she can travel further for new employment and enjoy more activities on weekends.

Another option

Take out a car loan with someone else

Consider asking a parent or family member to be a co-borrower for you by co-signing the car loan. This means two people are responsible for repaying the loan, even if only one person actually does make the repayments – the second person might be back up.

Ideally, the person co-signing a loan with you will have a stable income.

When you have a co-borrower for your car loan on Centrelink, they are not responsible for making the regular repayments. But if you default on the loan they will be called on to cover the difference between the market value of the car and the remaining balance on your car loan.

Questions to ask yourself

Is your income secure?

There are some issues that lenders have with accepting a car loan on Centrelink. One of them is that your benefit can change if you no longer meet the criteria for the payment that you are on.

Changes in government policy can also affect your income.

Lenders are under an obligation under the National Consumer Credit Protection (NCCP) legislation to lend responsibly. This means that if they can’t show that you can afford the loan, then they cannot give you a car loan. Of course, all decisions are based on your income and bank statements, among other things.

Do you have a supplementary income?

Working part time or casual can really help your car finance application when on Centrelink. Even if it is just one or two days a week, you can demonstrate your supplementary income using your tax returns, payslips, or bank statements.

Note that you’ll most likely need to have been employing at least three months with the same employer.

You might also be able to use invoices for work you’ve done, or items sold. Some people make a living selling things online or other forms of ecommerce and can prove their income is steady with documentation.

Ready to apply?

If you are ready to get more information about Centrelink car finance, speak to us. 

The team at Loans For People With Bad Credit are experts in matching car loan products and can help you get your ducks in a row, ready for your car loan.

Angela Monroe

Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.