Money saving strategies for Canadian car buyers

Money saving strategies for Canadian car buyers

Posted on July 26, 2022

Canadians interested in buying a car should apply these money-saving strategies. With car prices tracking higher and inflation eating up what little buying power our money has, we need to roll up our sleeves and do everything we can to stretch a penny (even though there are no more pennies in Canada).

This is something our Guelph auto loans team can help with.

Lenders are flush with cash and eager

While the Bank of Canada is currently raising interest rates, lenders who are flush with cash need to put it to work before they are forced to take on new capital at higher costs.

This is a simplified explanation of how lenders access money to issue loans, at least for the prime market.

The lender borrows money from the Bank of Canada, which had a prime rate last year of 0.25%

That lender can then issue out new loans and so long as the borrower repays their loan at the rate agreed, which in this case will be considerably higher than 0.25 %, the Bank of Canada gets paid back, the lenders make a profit and the borrower get a car, everyone is happy.

However, if the capital the lender borrowers is not deployed, after a while, it needs to be returned because the lender is paying interest on capital that isn’t being deployed.

When the lender needs capital gain, they will pay the prevailing interest rate, which is now 1.50%.

These higher rates mean the lender has to charge you, the borrower, more just to make a profit.

This is a situation where no one is happy, the Bank of Canada is not there to make a profit, the lender is forced to be less competitive with their pricing, and you have to pay more for the car you really want.

Wow, that was a mouthful, but as you can see, if you take out a loan now, you get a deal at a potentially much lower rate than what you would pay if you waited a few months from now, even if your credit was on the weak side.

Credit score needed to secure a competitive car loan in Guelph

Everyone is waiting for the recession to start; it is not a matter of “if” but “when,” and that could happen at any time.

Lenders have tightened up their lending requirements so only the most creditworthy borrowers can access the best terms. Your credit score needs to be over 680 if you want to stand a chance of getting a good deal.

Accessing the most competitive car loans in Guelph

The only surefire way to access competitive loans in Canada and save money is by working with a dealership in your area.

These dealerships already know all of the lenders throughout Canada and will shop around to ensure you are getting the most competitive car loan possible.

However, as mentioned, time is not on your side, so you need to reach out to the dealership today and get things rolling.

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