New Canadians that want to buy a car must apply for a car loan. This may be your first time buying a car, so it is normal to feel a little apprehensive but we got your back. Here’s how to finance a car loan when new to Canada!
The average Canadian is not able to buy a car with cash. The average Canadian earns roughly $54,000 per year before taxes, and the average new car costs $40,000. This is why you need to take out a car loan.
Multiple car loan providers in Canada
There are many car loan providers in Canada. However, you are not obligated to use your current bank. In fact, your bank may not have a competitive offer.
We will show you how to access the most competitive car loans in a bit. First, we need to explain what lenders want to see before issuing a loan.
Credit score fundamentals
Your credit score is the first thing that lenders are going to look at before anything else. Most of the major lenders have automated loan processes in place. If your credit score does not meet their minimum requirement, your application is rejected before anyone even sees it.
The credit score needed for a car loan is at least 600 and ideally anything over 680 for a prime interest rate. You can see your credit score by using free apps like Credit Karma.
Your credit score is not set in stone. It is always changing so you must check it monthly.
If you don’t have established credit, or your score is under 680, you can improve it by reducing your debts and paying your debts on time. It sounds cliche, but following those two simple rules will make your credit score rise.
Legitimate income sources
When you first finance a car loan when new to Canada, lenders are going to ask how much money you earn and from what sources. In the past, you could get a car loan with no income verification provided you had good credit. Now, lenders want to verify your income regardless of your credit score.
If you are self-employed, lenders will ask for your 12-month bank statements and income tax assessments for the last two years. Lenders will need to calculate your average monthly income. Your monthly income is used to calculate the maximum amount of debt, including a car loan you can afford.
Where to get a Great Var Loan when New to Canada
We touched on your local bank offering car loans, but you should go through your dealership since this is your first time buying a car. The dealership will be able to reach out to all of the lenders throughout Canada.
This dealership will secure the most competitive terms for you. They will also have cars for you to test drive. Test driving a car is one of the best parts of buying a car, so don’t feel pressured to make any decisions. After you have completed all of the test drives, you will know which of these vehicles will be the right one for you.
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!