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Tips for students needing to buy a car

Tips for students needing to buy a car

Students in Canada who need to buy a car have a few options available, they could ask their parents to co-sign the loan for them, or they could try to secure the loan on their own.

Our Mississauga car loans team are going to work on the premise that you are trying to secure the loan on your own and will cover the steps that are involved in the process.

Credit scores and car loans: what you need to know

The first thing that lenders focus on when assessing a loan application is your credit score.

Lenders tend to have tunnel vision when it comes to credit score.

So much so they have credited a decision-making matrix where if your credit score falls below the predefined requirement, your application is auto rejected by a computer, and no human has ever looked at the application.

In 2022 auto loan providers throughout Canada will be more conservative than they have been in over a decade.

This is due to the rising interest rates implemented by the Bank of Canada to battle inflation.

Prior to the pandemic and rising interest rates, you could get a pretty competitive Mississauga car loan as a student with a 650 credit score.

Those days are long gone; now, if you want to access the most competitive car loans, your score needs to be 720 or higher.

Debt to income ratios

Even if you have perfect credit, lenders are going to carefully assess your debt to income-ratio. This is the amount of debt you are carrying in relation to your income.

Since you are a student and probably just completed your studies, your student loans may not appear on your credit report, but you will need to start making monthly payments.

Lenders will not approve a new car loan if your new debt to income factoring in the car loan is greater than forty percent.

If your gross monthly income is $5,000, then the most debt you can have is $2,000 per month. You might consider taking on a part-time job or side-hustle to increase your income so you can qualify for a larger car loan.

Where to find the best student car loans in Mississauga

If you want to find the best student car loans in Canada, your best and frankly only viable option is going through a local car dealership.

The dealership has experience helping other students, just like you access the most competitive auto financing terms in Canada.

Another benefit of going through the local dealership, they usually have promotions and additional discounts for students and alumni of certain schools like UofT.

Now that you understand the fundamentals of getting a student car loan in Canada, you should head over to your local dealership and start going for test drives until you have found the car you like the most.

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

Categories: Auto Loan

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