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When you Apply for a Car Loan in Canada, Don't Do this

When you Apply for a Car Loan in Canada, Don’t Do this

Posted by on Feb 06, 2022 - Archived under Uncategorized

The average car in Canada costs well over $40,000, so we are going to help you avoid some of the most common mistakes that people make when they apply for a car loan in Canada.

 

Since no one has cash on hand to buy a car outright, you will need to apply for a car loan in Canada, so we are going to cover what steps you should take to get a competitive offer, don’t worry, it won’t be boring or overly complicated.

 

Sources of car loans in Canada

 

There are traditional and alternative sources of car loans, an example of a traditional source would be a bank, but with financial deregulation, there are a plethora of companies that offer car loans.

 

This deregulation gives more options to consumers, which is a good thing. Before deregulation, if you did not conform to the traditional lenders’ underwriting requirements, you could not get a car loan at all.

 

Prime and Subprime car loans

 

We touched on sources of car loans; now, we can discuss the categories of loans. A car loan is classified as “prime” or “subprime,” depending on the profile of the borrower.

 

Typically, borrowers that have weak credit or unverifiable income fall under subprime. The credit scores most lenders use to differentiate between prime and subprime is 620.

 

You should take a few minutes and review your credit score to see which category of car loan applies to you. Lenders will usually review reports from both TransUnion and Equifax, so you need to access your credit score for free from both of these reporting agencies.

 

New or previously owned vehicle

 

The type of vehicle you buy will impact the interest rate that you pay. Used car loans are traditionally more expensive to finance than a new car. Carmakers offer incentives to facilitate sales like low-interest rates.

 

Even if you have perfect credit, the interest rate on the used car will always be higher than a new one.

 

Covid had an incredible impact on the supply of used and new cars throughout the world.

 

You will have a limited number of new and used cars to choose from when you apply for a car loan in Canada, so even if you wanted to buy a new car, you would either have to wait a few months for delivery or opt for a used car. You cannot make this decision hastily, so give yourself some time to weigh the options.

 

Finding the right loan provider

 

If you did a search online, you would see a large number of websites offer car loans, and the rates may be tempting. While the rates that you see online might catch your eye, they are usually teaser rates. The best source of competitive car loans has always been a local dealership.

 

When you work with a dealership, they can get you a car loan even if you have terrible credit. The dealership would help draft a plan for you to rebuild your credit and qualify for a prime car loan in the future.

 

If you keep your credit score high and work with a dealership, your odds of making a mistake buying a new car are virtually nil.

 

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! 

 

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