How rising interest rates impact Canadian car buyers

How rising interest rates impact Canadian car buyers

Posted on May 5, 2022

Inflation is wreaking havoc on the Canadian economy; it does not take a Nobel laureate in economics to see the effects of inflation, just head over to the local grocery store or gas pump, and you will see the full effects of inflation.

To slow inflation, the Bank of Canada is going to start ratcheting up interest rates from historic lows.

The challenge with rising interest rates is it impacts the borrowing costs that everyone has to pay.

Canadian households are carrying a large amount of debt

The pandemic allowed some Canadians to pay down their consumer debt, but as a whole the amount of debt per household has increased.

Any changes in interest rates are going to be felt immediately. The interest rates will be staggered, but they are coming, so you will need to take decisive action if you need a new car.

How much is your current vehicle worth as a trade-in?

Even if your current vehicle has high mileage, you should be able to get a considerable amount of trade-in value.

This can be used as a down payment towards a newer vehicle, provided this current vehicle is paid off.

If your current vehicle has not been paid off, the existing loan can be rolled into a new one with your new car, provided you have good credit and a stable income.

Interest rates will be high for quite some time to come

The higher interest rates will take months, if not years, to slow inflation; this means that any car deal you lock in now, even if the asking rate is slightly higher than prime, will seem like a bargain compared to what people will be paying a year from now.

To access the most competitive interest rates, your credit score will need to be north of 680.

You can get a car loan with a 600 credit score, but the rate will be higher than what you would pay with a 600 credit score.

However, it is well worth your time to go for the loan, given how high rates are going to shoot up.

Having a long-term car-buying plan

Since interest rates are going up, you should pick a vehicle that will meet your current and future needs for at least 4-to 5 years.

This should be enough time for things to stabilize, so things should be stable when it comes time to buy a new car.

To lock in the best financing terms, even if you have credit issues, you need to contact a car dealership in your area.

The dealership is going to shop the entire Canadian market and find you a great deal.

The dealership has the ability to negotiate a lower interest rate on your behalf, so you will benefit tremendously from their help.

The dealership also has credit experts who can show you what steps need to be taken, so you have access to the most competitive car loans in the future.

So now that you know what is going on in the Canadian car buying marketplace, you need to contact your local dealership today.

Contact Unique Chrysler for help, advice and competitive Ohsweken car finance and leasing.