Car loan misconceptions: what Canadians need to know

Car loan misconceptions: what Canadians need to know

Posted on September 28, 2022

There is a tremendous amount of misinformation on the Internet about car loans.

The average car loan can easily set you back forty grand, so we are going to give you the straight goods on how car loans work in Canada and the steps you should take to get a good car loan.

Car loan myth: Your local bank has the best car loan terms

This is one of the biggest myths when it comes to car loans in Canada. In the past, Baby Boomers and their parents would go to the local bank to get a car loan.

They did this because they already had an existing relationship with the bank, and frankly, there weren’t many other options.

Thanks to the Internet and economic freedom, lenders from throughout Canada are all vying for your business; this means that you are not forced to “take it or leave it” deals being offered by your local bank.

Local banks tend to focus on financial products that generate the biggest return on investment; this is usually housing.

While car loans can be lucrative, banks tend to only give a decent deal to borrowers who do a significant amount of business with the bank and/or have fantastic credit.

Car loan myth: You can find the best financing terms online

The Internet levels the playing field when shopping for most products and services, but when it comes to car loans, you are always going to pay retail rates when shopping online.

If you want to save money, you need to get access to “wholesale interest rates,” and the only way you can do that is by going through a local dealership (more on that later).

Car loan myth: You need a credit score of 650 or higher to get a car loan

There is a vast number of car loan providers in Canada, and each of them specializes in a specific type of customer profile.

Some lenders focus solely on the most creditworthy borrowers, while others focus on borrowers with complex income/credit issues and charge a higher interest rate to facilitate those deals.

Even if you have bad credit, you can still get a car loan, but you need to find the right dealership to help you locate a suitable lender.

Fact: Car loans are a part of life for most Canadians

The vast majority of Canadians need access to car loans in order to buy a car.

Most Canadians do not have the ability to save enough cash to buy a brand-new or relatively new used car.

With the average car payment nearing $600 per month, you need to work with a dealership in your area to help you find the most competitive interest rate possible.

You should reach out to the local dealership soon, interest rates are rising across the board in Canada, and if you continue to wait, it will cost you more interest over the long term.

When you’re ready for a car lease or loan, get in touch with the auto loan experts at Northway Ford for great deals on auto finance.