Why You should Buy a Car Right Now before Prices Rise

Why You should Buy a Car Right Now before Prices Rise

Posted on October 27, 2021

Canadians that have been waiting for the perfect time to buy a new car, should not wait any longer. It seems that interest rates are going to start climbing and if you don't buy a car right now it could end up costing you dearly.

Our Waterford car loans team outlines why you shouldn’t delay if you’re planning a new car purchase anytime soon.

What do mortgage rates have to do with car loans?

At first glance, mortgage and Waterford car loan rates are separate financial products, but they are linked.

If banks are concerned about risk the first asset class they raise interest rates on is mortgages. TD has just increased its mortgage rate and it won’t be long before the other banks follow suit.

You may be thinking, what is the big deal if the interest rates move up a few basis points?

While the numbers may seem trivial when you are dealing with large sums of money those costs can add up quickly (The average new car price is over $40,000, while there are some lower-cost entry-level cars, you can see that we are not dealing with small amounts of money).

Prime interest rates for only buyers with the best credit

To get the best possible interest rates, you need a very high credit score, well over 700. If your credit score is below that, then the interest rate you will pay may be considerably higher.

When interest rates rise, it affects everyone from the top down. While borrowers with great credit may only pay a few basis points more to finance their new car purchase.

Individuals who had credit challenges in the past may end up paying several percentage points on the Waterford car loan!

Sources of competitive car loans

If you are shopping online for car loans, you can take note of what the average interest rates are but you should give serious thought to working with a local dealership.

The websites that are offering these quotes are not the actual lenders and just provide a platform that matches prospective borrowers with potential lenders.

When you visit a local car dealership, they have a vested interest in making sure you get a good deal. The dealership is motivated to sell the car but they also want you to become a repeat customer and give them positive feedback.

The only way the dealership can achieve its goal is by getting you a competitive auto loan based on your situation.  Lenders focus on your credit score and ability to pay the loan.

Your credit score can be accessed by going to Credit Karma, it is a free service and most Canadians use it regularly. If your credit score is high, you may be able to get a competitive interest rate.

Aside from your credit score, your income has to be high enough to repay the loan. Industry experts say that you cannot carry more than 42% debt to income, so if you make $4,000 per month then your total debts including the proposed car loan cannot exceed $1,680.

Don’t worry about these calculations, your local dealership rep will be able to do all of the number crunching for you. What you have to do is reach out to the dealership ASAP before interest rates go higher which limits the types of new car you can buy.

If you're ready to buy a car right now, get in touch with the Waterford auto loan experts at Northway Ford for great deals on auto finance.

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