As a newcomer in Canada, you will face some unique and distinct challenges. Something that you will need to deal with at some point in your life is buying a car. Here’s how to finance a car loan when you’re new to Canada.
Few Canadians are able to pay cash for their car, at least from their own savings. The only way these individuals can buy a car is with a loan.
Since this may be your first time financing a car in Canada, there are some things you should be aware of to help make the experience a more positive one.
Don’t Give out your Social Insurance Number (SIN) Online
Something that you may be tempted to do is apply for a car loan quote online.
There is nothing wrong with shopping around and finding out what options are available to you but, yes there is always a but, do not give out your social insurance number (SIN) to any website or any other person for that matter.
Your SIN is a 9-digit number issued by the Government of Canada, and while credit providers can use it for identification purposes, you should not give it out to just anyone and, in fact, don’t even use it for credit applications.
Get a cell phone
Some Canadian carriers don’t require a credit check and some will also report your monthly payments to the credit bureaus. Find a network and a contract that works for you.
Set up automatic payments for your phone contract to avoid missing any while you’re setting up your new life.
There is No Shame in Using Credit
Something that may surprise most newcomers to Canada is just how much we rely on credit.
For some cultures, debt is considered taboo and is to be avoided at all costs. In Canada, debt is a way of life, and just about everyone has a car loan they need to pay.
The average car loan can last up to 84 months, and it usually runs about $500 per month, so you can see why most Canadians finish paying off their car only to buy another one right after because their current vehicle no longer meets their needs.
First steps to building credit as a newcomer to Canada
Your first step to building credit once you’re here is to set up a bank account and get a credit card.
Many banks in Canada offer cheque accounts to newcomers, including RBC. If your home bank has an international presence in Canada, they may also be a good bet.
Everything begins with the bank account so that should be your first step.
Credit cards and credit building
Once you have a bank account, you should apply for a credit card. Even if you’re not usually a credit card user, it’s an important tool for building credit.
Some banks will offer credit cards to newcomers with no credit. Otherwise, there are secured credit cards you can use to get started. We recommend using a standard credit card if you can get one, otherwise a secured card will work.
Use it for everyday expenses but make sure to pay it off in full each month to avoid paying interest. Set up automatic payments so you never miss a payment but don’t depend on minimum payments to run a credit card.
Documentation required for auto loans in Canada
You will need a few pieces of documentation to be able to apply for an auto loan but also to drive in Canada.
You’ll need:
A Canadian drivers licence – You can drive for a limited time on your existing driver’s licence but will need to convert it to a Canadian licence as soon as you can.
Do get a drivers licence, you’ll need 3 official forms of ID and an abstract letter from your home country’s driving licence agency.
You will need your drivers licence for auto insurance and to use as ID for many other paperwork requirements so it’s well worth getting.
Canadian Citizenship card – To apply for an auto loan and for many forms of insurance, you’ll need a Canadian Citizenship card. You need to be a citizen of this country to be able to access lending.
You’ll also need it for paying insurance monthly if you decide to do so.
The Canadian Citizenship card is provided once you are given citizenship and is all part of the immigration process.
Once you have your driver’s licence and Canadian Citizenship card, you can legally get auto insurance which you’ll need to buy a car.
Proof of employment and income – If you plan on using an auto loan to finance your new car, you’ll need to pass the basic lending criteria that everyone does here.
That means proving who you are, where you live and how much you can afford to borrow.
That usually requires 3 months’ worth of salary statement or pay stubs, 3 months’ bank statements and any paperwork for other income.
Different lenders require different levels of proof but as a newcomer, be prepared to be asked for a lot of proof!
A Plethora of Different Car Financing Options Available
There is a variety of different sources of car loans in Canada. While your current bank may offer credit cards, mortgages, and car loans, they may not have the most competitive offering.
What you should do in this situation is shop around and look for the lender with the best deal around.
One of the easiest ways to find an amazing deal when shopping for new to Canada car loans is to go where the people deal with car loans all the time, namely your local car dealership.
The dealership is constantly originating new car loans and can help you get a great deal.
Since the dealership already has a working relationship with most lenders, they can get you a better deal than what you could negotiate if you tried to secure a car loan by yourself.
What you should do is reach out to your local dealership right now and take a few cars out for a test drive to figure out which one you like the most; this is part and parcel of the Canadian car-buying experience.
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!