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What entrepreneurs need to know when buying a car in Canada

Posted by on Jul 11, 2022 - Archived under Bad Credit Car Loan Tips

When a business owner wants to finance the purchase of a new car, they have to get over some unique obstacles. Most people, whether they are self-employed or not, have to get a loan to pay for big purchases like a new car.

We will give you the information you need to make a better-informed decision.

Is your business a sole proprietorship or a company?

Most entrepreneurs, especially those just starting out, choose to be a sole proprietorship. The first benefit of being a sole proprietor is that the process is easy.

You don’t have to do anything special besides register with the CRA for a HST number.

Even though this is the easiest way to do things, you pay the most taxes possible. If you incorporate, you can pay fewer taxes, but there is more paperwork.

For the rest of this conversation, we’re going to assume that your business is a sole proprietorship.

Erratic income

Calculating your monthly income is one of the hardest things for potential lenders to do when deciding whether or not to give you a car loan.

As a business owner, your income can change from month to month, and some months will be better than others.

One thing you can do to make your life easier and improve your chances of getting a car loan is to show your last year’s bank statements.

By taking the average amount of money you make in a year and dividing it by twelve, the lender could get a ballpark figure.

The potential lender will want to see your income tax notice of assessment to make sure that the amount of money you say you make is correct and that you don’t owe the CRA any money.

Keeping a laser focus on your credit utilization

Self-employed Canadians tend to finance their businesses, at least at first, with their personal lines of credit and credit cards.

This is because their income isn’t always steady. This is the simplest way to get some extra cash, but it can hurt your credit score.

If you take on too much debt, you will use more than 30 percent of your available credit. This will hurt your credit score and add to the total amount of debt you have to pay off.

You should try to pay off this consumer debt as soon as possible before it starts to hurt your cash flow.

Where business owners can get the best deals on car loans

If you’re an entrepreneur looking for the best deals, you shouldn’t bother looking online because you won’t find any.

Your best bet is to work with a local dealership that has been around for a long time and has helped business owners like you get approved for car loans.

The dealership knows a lot about how auto financing works in Canada and which lenders will give you the best deal. If you want to save money on your next car purchase, you should call your local dealership right now and ask for the best deal 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!

Let’s get in touch! 

Dixie Auto Loans