Car finance for contractors: what lenders want from an IT contractor, engineer or locum on an ABN

Contractors get a strange deal from car lenders. You might earn well above a salaried colleague, yet you have no payslip, a contract that ends in March, and an ABN that’s only 14 months old. The short answer is that you can finance a car through your business, but you need to show the contract income instead of a payslip, and you need to be realistic about how much of the car is genuinely business use.

This guide covers both halves: what a lender wants to see, and the tax rules that quietly decide whether the car is worth financing in the business’s name at all.

How does a lender read contractor income?

A lender isn’t asking “what’s your salary?” It’s asking “how likely is this income to keep arriving for the length of the loan?” For a contractor, the evidence runs roughly in this order of strength:

1. The current contract or agency agreement, showing the rate, the term and who the client is.
2. Recent invoices and the payments landing in your business account, which prove the contract is being paid.
3. Business bank statements, which show the pattern through gaps between contracts.
4. BAS and tax returns, if your ABN has been around long enough to have them.
5. A history in the same field, such as employment records, a reference, or earlier contracts.

If your tax returns lag behind where you are now, low-doc vehicle finance uses bank statements, BAS or an accountant’s letter in their place. If you only recently left a permanent role, our new ABN page covers how lenders weigh a short trading history against years of experience.

Day rate, retainer or project: does it matter?

It matters a little. A fixed-term day-rate contract at a steady client reads cleanly. Project-based income with gaps looks lumpier, so lenders lean on a longer run of bank statements to see you stay afloat between engagements. Neither is a problem; a lumpy history just needs more explaining on the form.

Sole trader, company or trust: does the structure change the assessment?

Yes. A sole trader borrows personally under their ABN. A company borrows as the company, usually with the director’s guarantee. A trust borrows through its trustee. Lenders assess the income that sits in that entity, so make sure the contract is actually in the name that’s borrowing. A company that invoices through the contract but whose director borrows personally creates a mismatch that slows things down.

If you’re deciding between names, read our guide on moving a work vehicle from sole trader to company before you commit; changing later costs more than choosing well now.

Do the PSI rules change what my business can claim for the car?

This is the part most contractor car-finance pages skip, and it’s where white-collar contractors differ from tradies.

Personal services income (PSI) is income mainly earned from your personal skill or effort, such as an IT consultant’s day rate. If the ATO’s PSI rules apply to you, you’re treated much like an employee for deductions. The ATO says deductions are allowed only if they’re incurred in producing the PSI and you’d be entitled to the deduction as an individual. For cars, the ATO guidance also limits you to one car (not several) generating deductions against the same person’s PSI.

Whether the rules apply depends on whether you’re running a personal services business. In outline, you pass if:

• the results test is met — you’re paid to produce a result, supply your own tools and fix your own mistakes at your cost; or
• less than 80% of your PSI comes from one client (or associated group) and you pass at least one of the unrelated clients, employment or business premises tests; or
• the ATO has made a determination in your favour.

One detail catches agency contractors: the ATO says work won through an agency doesn’t count as making offers to the public for the unrelated clients test. Contract through a labour-hire agency and the PSI rules may well apply.

None of this stops you financing a car. It shapes how much of the cost the business can recover, so ask your accountant before you pick the car, not at tax time.

Is a client visit “business use” for a consultant’s car?

Only partly, and this is where contractors over-estimate.

• Travel between your home and a regular workplace is generally private. The ATO’s PSI guidance gives an example of a home-based worker who can’t deduct driving to a client’s premises, because an employee couldn’t either.
• Travel between different client sites, to meetings away from your base or to pick up equipment can be genuine business use.

If you work on a client’s site five days a week, your business percentage may be low, which affects your logbook result and the GST and depreciation you can claim. Try our business-use percentage tool with realistic numbers before you pick the car.

How much does the car limit matter for a contractor’s car?

Contractors often choose a sedan or SUV, so the car limit bites. For 2026–27 the ATO’s limit is $69,883. It caps the cost on which you can claim depreciation and the GST credit, so the most GST credit on a passenger car is $6,353. Luxury car tax is a separate threshold above that.

Car price	What the limit does
Below the limit	Depreciation and GST credit based on the full cost, subject to business use
Above the limit	Depreciation and GST credit stop at the limit; you still pay for the whole car
Ute or van built mainly to carry goods	Often outside the limit, but check the model with your accountant

Our car limit page has the detail.

A worked example (illustrative only)

An engineer spent nine years on a salary, then moved to contracting through her own Pty Ltd 10 months ago. She holds a 12-month contract with one client through an agency, renewed once already. She wants an SUV for around $58k and has a modest deposit.

She isn’t a standard “two years of tax returns” borrower, so her file leans on: the agency agreement, ten months of invoices and bank statements, her employment history in the same field, and the deposit. A chattel mortgage in the company’s name with her guarantee is the likely structure. Her accountant flags that because her income is agency-sourced, the PSI rules may limit the company’s car deductions, and that her business use will be well under 100% because most of her driving is to the client’s office. She chooses the car with that in mind.

What should I have ready before I apply?

• the current contract or agency agreement, and any renewals;
• your last few months of invoices and business bank statements;
• ABN, and ACN if it’s a company, plus GST registration details;
• BAS or tax returns if you have them;
• ID, and details of the car you’ve chosen;
• a short note on your field and how long you’ve worked in it.

Our documents checklist lists the rest. If you’d like to see where you stand before collecting it all, you can check your options in 60 seconds — no credit check just for asking.

What are the common mistakes?

1. Buying the car before checking the tax. The car limit and PSI rules can change the real cost.
2. Assuming the commute counts. It usually doesn’t.
3. A mismatch between who earns and who borrows. Contract in the company, loan in your own name.
4. Overstating the contract’s security. Lenders ask what happens at renewal. A straight answer helps.
5. Mixing it up with a personal car loan. This is business finance; the car must be for business purposes.

Ready to see where you stand?

Contracting is a different kind of income, and it deserves a lender who reads contracts and invoices rather than expecting a payslip. We look at vehicle finance for self-employed people every day, and a contract that ends in six months is something we can plan around.

Enquiring takes about 60 seconds, and your credit file isn’t touched just for asking. We don’t send your details to a pile of lenders, so your phone won’t light up — a real person reads your situation, then calls you to talk through which structure and lender suit your contract. Please fill the form in accurately, including how much of the driving is actually for work, so we can match the right option first time.

Check your contractor car finance options →