Entrepreneurs wanting to finance the purchase of a new vehicle have some unique hurdles they must overcome.
The vast majority of consumers, whether self-employed or not, must finance major purchases like buying a new car, so we are going to give you the information you need to make the right decision.
Is your business incorporated or a sole proprietorship?
The default answer for most entrepreneurs, at least those that are just starting out, is a sole proprietorship.
The immediate benefit of being a sole proprietor is a simple process; there is no special documentation that you must submit aside from registering for an HST number with the CRA.
While this setup is the simplest, you are taxed at the highest possible level, if you are incorporated, the taxes you pay can be reduced, but there is more red tape involved.
For the remainder of this conversation, we will work on the premise that your business is classified as a sole proprietorship.
One of the biggest issues that prospective lenders have when trying to determine whether to approve a car loan is calculating your monthly income.
As an entrepreneur, your income can fluctuate, and some months are better than others.
One way you can make your life easier and help increase the chances of getting approved for a car loan is to provide bank statements for the last year.
By averaging out how much money you brought in a year and then dividing that amount by twelve, it would give the lender a ballpark figure.
The prospective lender will want to see your income tax notice of assessment to make sure the income you claim to earn is accurate and that you do not have any outstanding debts with the CRA.
Risk of being over-leveraged
Along with having an erratic income, most self-employed Canadians tend to finance their operations at least at the start with their personal lines of credit and credit cards.
This is the easiest way to raise some working capital, but it can negatively impact your credit score.
If you take on too much debt, your credit utilization ratio will go beyond the recommended 30%. This will put downward pressure on your credit score and increase the total debt you have to service.
It would help if you tried to reduce this consumer debt as quickly as possible before it hurts your cash flow.
Where to find the most competitive car loans for entrepreneurs
Entrepreneurs who are looking for the most competitive deals shouldn’t bother looking online; you won’t find good deals there.
Your best option is to work with a dealership in your area, one that has been in operation for many years and has helped other entrepreneurs like you get approved for car loans.
The dealership has a keen understanding of the Canadian auto finance marketplace and which lenders are going to give you a good deal.
If you are serious about saving money on your next car purchase, then you should contact your local dealership today and find a deal that makes the most sense 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!