There has been a tremendous amount of news coverage on the lack of new and used cars to buy in Canada. Since the majority of us need a car to lead a normal life, we are going to take a closer look at how do car loans work.
Our St. Catharines car loans team outlines a few key things to know when you’re thinking about financing a new car purchase.
No one size fits all model
There is no one size fits all approach when it comes to St. Catharines car loans. The number of lenders has spiked in recent years and lenders now cater to a specific type of borrower profile.
Whether you are self-employed, retired, have bad or no credit, some lenders are willing to do business with you.
How lenders underwrite car loans in St. Catharines
We will be speaking in broad terms since each lender will have a nuanced approach to loan underwriting. The first thing lenders will want to know about you is whether you are responsible by looking at your credit score.
Lenders want to see a stable and consistent track record of repayment over time. The way they can identify borrowers who meet the criteria is by targeting those with a credit score over 700. The only way to get a credit score that high is by paying your bills on time for a couple of years. If your credit score falls below that goal, you can repair it by making your payments on time and avoiding taking on excessive debt.
When the lender is satisfied that you are responsible, they need to know if you are earning enough money to service the loan. Your payslip or income tax assessments will show the lender how much you are earning.
The lender will perform a calculation looking at your debt to income ratio and if it meets their requirement of 40% or less, your loan should be approved.
How to find car loan providers in St. Catharines
This is a complex question because there are many websites dedicated to providing car loan quotes. You may think that if you shop around enough online, you will find the best terms. In reality, the best lenders do not spend money advertising online but instead, work through a dealership network.
Wholesale vs retail car loans
The lenders that you see online are retail lenders, this means the interest rate they charge you will be higher than what you would pay if you were dealing with a wholesale lender.
We all can understand the difference between wholesale and retail pricing by visiting a big box versus a mom-and-pop shop, car loans work similarly.
When you go through a local dealership, you will have access to the most competitive interest rates and top-notch customer service. These dealerships do a tremendous amount of business with lenders all across Canada so you will have no issues securing the most competitive terms.
As an added benefit, the dealerships have new cars in their inventory that you can take for a test drive.
If you are seriously thinking about buying a car, even if you have credit issues, then your best option is to visit a local dealership.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!
For any questions or concerns, please don’t hesitate to contact us here!