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The truth about bad credit car loans in 2022

The truth about bad credit car loans in 2022

You’ve seen the advertisements online; no credit refused car loans, everyone approved and probably wondered if these deals are too good to be true!

Our Binbrook car loans team are going to give you a peek behind the subprime car loan scene. By the time you reach the end of this; you will have a better understanding of how auto financing works in Canada.

It all starts with a need

You need a car, car dealerships need to sell cars, and finance companies need to issue loans so they can stay in business.

Everyone in this scenario needs something, and everyone has something to gain by working together and something to lose if they don’t have full transparency.

The subprime auto market in Canada is worth billions, but the term subprime has a negative stigma attached to it; this is due to the 2008 subprime housing crisis south of the border.

All subprime means is that something does not conform to what is considered a prime candidate.

Subprime doesn’t mean bad; it just means different

The lenders who offer subprime loans cannot access capital through the Bank of Canada; the only way these firms are able to raise funds is by going to the stock market if they are large enough or through private investors.

These investors know that the loans being offered have a higher risk of default, so they demand a higher interest rate to offset the risk (higher risk/higher return).

The higher interest rates are passed on to you as a higher rate.

The lender also has overhead they need to generate income to offset, so they will need to increase the interest rate.

This is nothing personal, just the cost of doing business. Since these lenders are not able to scale and do a large number of deals compared to the prime auto loan market, they need to make the most of every opportunity.

How to secure a bad credit car loan in Canada

While most of the offers you see online are not viable, you can get approved for a car loan in Binbrook if you have bad credit, but you need to use a more old-school approach.

What you need to do is head over to a local car dealership, one that specializes in helping its customers get approved.

The dealership will be able to identify which subprime auto lenders are best suited for your situation. These dealerships will also be able to show you how to fix your credit score so that in a year or two, your score will improve, and you can access the best financing terms.

What you need to do now is contact your local dealership and get things rolling; until you deal with your credit issues, you will be stuck in the subprime category and forced to pay a higher interest rate than necessary.

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

Categories: Auto Loan

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