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Can you buy a car when you are on old age security?

Posted by on Jul 22, 2022 - Archived under Bad Credit Car Loan Tips

A growing number of older Canadians who had dreams of Freedom 55 and retiring at 60 are returning to the workforce. Inflation is eating up their savings, and they have to adjust to the new normal that is 2022.

These hardworking older Canadians are drawing their Old Age Security (OAS) and Canada Pension Plan pensions but now need a new vehicle so they can commute to work.

While returning to the workforce after retiring may not be a viable option for every Canadian, if you need to buy a car while on a pension, these tips are going to help.

How car loans have evolved in Canada

The car loan industry has changed dramatically in the last ten years. In the past, before the market was deregulated, your loan options were your local bank/credit union, but now you can get financing from anywhere in Canada.

While this competition creates great opportunities for Canadians, you need to make yourself stand out as a great loan candidate by getting your financial ducks in a row.

Taking stock of your income and credit

Lenders are focused on how much disposable income you receive that can be verified and your credit score. Let’s start with your credit score; if your score is over 700, you are considered to be the most creditworthy and deserve the lowest interest rate on car loans.

To find out what your credit score is, you must sign up for free credit reports with both Equifax and TransUnion; there is no cost, so why not sign up now?

If your credit score is under 700, you can still get a car loan; you may be charged a higher interest rate.

The minimum credit score needed for a conventional car loan is 620; anything lower than that, and you are going to pay a considerable premium in the form of a higher interest rate.

There are resources to deal with your credit challenges that we will discuss later; the next focus is your income. Since you are drawing pensions, those are considered income and will be used when calculating your maximum car loan.

The lender will want to know how much money you anticipate earning in your new job.

If this is a role you worked in before you retired, the lender may be more lenient in the underwriting and give you the benefit of the doubt that you will be employed for a long time.

Where to get a car loan when you are on OAS

By far, the best place to find a car loan when receiving OAS/CPP or just returning to the workforce after retiring is a local car dealership.

The dealership will be able to help you improve your credit score so you can qualify for the best interest rates.

The dealership can also identify with confidence the lenders that are going to give you the most competitive loan terms.

You should head on over to your local dealership today and go for some test drives to figure out which car you like the most.

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