How to Buy a Car with Less Debt in Canada

How to Buy a Car with Less Debt in Canada

Posted on January 20, 2022

Owning a car is essential if you live in Canada. Unfortunately, our public transit system is not capable of meeting the needs of all Canadians. The challenge most of us face right now is affording a new car when inflation is driving up the costs of everything.

One way to make car ownership more affordable is by shopping around for the lowest interest rate London car loans. However, with the plethora of car loan providers advertising online, you may feel apprehensive. So we'll try and help you buy a car with less debt in Canada.

Qualifying criteria for a prime interest rate car loan

Start by looking at your credit score. The median score needed for a prime interest rate car loan is in the 680s, this is the biggest way to buy a car with less debt in Canada.

You can download Credit Karma on your phone. Credit Karma will give you access to your TransUnion credit score, and you need to sign up for Equifax to have a complete picture.

The credit score reported from TransUnion may not match what Equifax reports.

Since most lenders pull reports from these agencies, you need to stay on top of things.

Your score may be under the 680 mark due to an error inside one of your credit reports.

Unfortunately, these agencies do make mistakes. If there are errors in your report, you can have them removed by following the detailed dispute process posted on the respective credit reporting agency website.

Have you worked out your car-buying budget?

Having good credit can make a difference in the interest rate you are being charged. Your income is equally important when you buy a new car, especially with the job insecurity caused by the pandemic.

Lenders will look at your budget and use 35%+/- as the maximum amount of debt you can carry. This is taking into consideration the new car loan. You can refer to your current budget and quickly determine how much you can afford while factoring in the running costs.

The prospective lenders have stepped up their underwriting process. For example, you could get a car loan with a 650 credit score and one pay slip in the past. However, lenders now want to see multiple pay slips or bank accounts for the last 6-12 months. Without this income verification, the lender will not approve the loan.

Finding the most aggressive lenders

The most aggressive car loan providers are not found via the Internet. These lenders can only be accessed through a car dealership network. You will need to visit your local car dealership and have them secure the most competitive loan terms for you.

The dealership will also help you find the perfect car and provide top-notch customer service.

You should feel at ease buying a new car, and if you stick with the advice provided and go through a local dealership, you will see tremendous success.

However, keep in mind there is a shortage of cars in the market, so you need to be decisive, or you could miss out and not be able to buy a car!

If you’re looking to sell your car, we’d love to buy it for a great price! Simply fill in the form below and we’ll get back to you ASAP! 

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