The biggest mistakes you can make when financing a new car

The biggest mistakes you can make when financing a new car

Posted on October 13, 2022

There are some common mistakes you should avoid when trying to finance the purchase of a new car. Whether buying a conventional gas-powered or EV, these suggestions will help you get the best value for your hard-earned dollar.

Online loans are not a good idea

Something we should address immediately is how the loans you see advertised online aren’t all they are cracked up to be.

While they may claim to have the lowest interest rates in all of Canada, the truth is these websites are just landing pages that capture personal details.

These details are then sold to multiple companies who are willing to pay to access these “leads”.

There are no guarantees that you are going to get a good deal or that your personal information is actually safe. Once you put something out there on the Internet, you can’t take it back.

Taking a look at your credit report before you go car shopping

What most Canadians do is go and find a car they absolutely love, then try to get financing lined up without first checking their credit score. Knowing your credit score before you try to get financing will help you make better-informed decisions.

To get the best interest rates on a new car in Canada, whether gas-powered or EV, you need a credit score of over 680.

If your score is below that level, don’t worry; you can still get a car loan, but the interest rates won’t be as competitive.

There are free resources that you can use to gain access to your credit report and score. TransUnion offers free access; you just need to pass their identity verification process. (This step should only take a few minutes to complete)

Understanding the information inside your credit report

Credit reporting agencies use a scoring model to calculate your credit score; this ranges from the absolute lowest score of 300 to a perfect 900; no one actually reaches those thresholds; the average score in Canada is in the 660 range.

If you are 660 or above, you are doing great; if your score is below that average, then you will need to do some work to raise your score.

Quick and easy steps to raise your credit score

There are a few simple steps that you can follow to raise your credit score. Start by making sure you do not have any accounts that are past due.

Missing even one single payment can do a number (pun intended) on your credit score.

Your payment history is the single biggest influencer of your credit score. By always making your payments on time, your credit score will continue to increase.

Something you could do to dramatically increase your credit score is to pay down any excess debt you are carrying.

This impacts your credit utilization rate, which is the second biggest influencer of your credit score.

By making sure your credit score is as high as possible, you will have a more pleasant car-buying experience, so be sure to follow these tips.

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.