What to Know About Car Financing in Canada
What to Know About Car Financing in Canada
Posted on February 14, 2023
Canadians who are shopping for a new car in 2022 are going to be facing a unique series of challenges. Inflation is one of the biggest issues you are going to face on two unique fronts.
Coming to terms with how inflation is impacting Canadian car-buyers
The first way inflation will impact your car buying is by how much cash you have left over in your budget for a car payment.
Prices on food and energy are at historical highs and climbing monthly; the latest reports from Stats Canada indicate that monthly inflation is at 7% monthly, which means food and energy have become 7% more expensive this month than the previous month!
You will need to cut corners, use coupons, and revise your budget if you want to have enough cash left over to cover the car's upcoming car payment.
These rising prices also impact what you ultimately end up paying for the new car.
Rising interest rates are a consequence of rampant inflation
The Bank of Canada has been increasing the prime lending rate to try and slow the money supply. This "quantitative tightening" is the only viable option that the Bank of Canada has available to slow inflation.
Each time the bank increases the prime rate, it increases the borrowing costs on everything from mortgages to lines of credit and also car loans.
When car loan interest rates go up, it makes it harder to qualify for a car loan, and you also need to pay more to service that loan.
As you can see, inflation is having a profound impact on all Canadians, whether they are looking to buy a car, house, or anything else that requires credit.
How to lower your car buying borrowing costs
On the macro level, there isn't much you can do about inflation, but there are some things you can do to help limit the amount of financial pain you are going to experience.
- Start by working on your credit score to get it as high as possible. The higher your credit score, the lower the interest rate prospective lenders will charge you. Do you know what your current credit score is? If you are not sure, sign up for free credit monitoring with TransUnion and Equifax right now.
- Reduce the total amount of debt you are carrying on your credit report. Reducing the amount of debt you are carrying will boost your credit score, and at the same time, it will also help provide you with added room in your budget that can go towards the new car loan.
Accessing the best car loans in Canada
You should not delay making the decision to buy a car any longer; with each passing day, the costs to you will only grow.
The best source of competitive car loans and affordable cars is by going to your local car dealership.
The sooner you go through the local dealership, the sooner you can lock in the savings, but you need to move fast.
Contact Unique Chrysler for help, advice and competitive car finance and leasing.