A lender looks at a borrower's income when deciding whether to make a loan. Even if you are retired and no longer working, you can still qualify for a loan if your income is high enough. Generally, lenders look to see if you have a good credit history and the funds available to repay the loan. Lenders also measure your level of financial responsibility by the amount of any other debts you owe.
Proof of Income
Standard practice for lenders is to ask to see copies of paycheck stubs and income tax returns as proof of income when a person applies for a loan. However, if you are retired, a lender will ask you to provide copies of pension or other retirement income statements as verification of income. You can also show evidence of assets to qualify for a car loan. Older individuals are more likely than younger borrowers to have significant savings, high equity in a home and income-producing investments. In fact, you may be able to negotiate a lower interest rate and choose your repayment terms if you have the assets to secure a car loan with collateral.
Credit History
Your age can affect your credit score and work to your advantage. On average, older individuals tend to have higher credit scores. Retired individuals usually have a long credit history --- one factor that affects your credit score. According to myFICO, length of credit history accounts for 15 percent of your FICO score. Your credit score will be higher if you've had the same credit accounts for a number of years, especially if you have an excellent repayment record. Payment history accounts for the biggest percentage of your credit rating, therefore, lenders see you as a lower risk the longer you've maintained a credit account in good standing. If you decide to open a new line of credit to buy a car, a high credit score can help you get an auto loan at a much lower rate of interest.
Outstanding Debts
A 2010 Associated Press-GfK poll found that retired people and individuals age 60 and older are among the population groups that report the least amount of stress related to debt. In most cases, those people with less debt have more money. One reason for retired individuals having less debt is that many people pay off their mortgage loans by the time they retire. How much debt you owe makes up about 30 percent of your credit score, so low debt can increase your chances for getting approved for a car loan.
Loan Term
Ordinarily, qualifying for a car loan with a term of five years should be no problem. Depending on your age, some lenders may offer you a shorter loan repayment than the longer loan term for which a younger borrower might qualify. Although this will increase your car payment, many retired borrowers have savings enough to pay a substantial down payment, bringing down the monthly payment. If you have excellent credit, you can take out a 24- or 36-month loan term at a low rate of interest. Qualifying for a lower interest rate can save you money and reduce the number of months you need to pay off the loan.
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