Where auto loan interest rates are tracking in Canada
Where auto loan interest rates are tracking in Canada
Posted on October 11, 2022
Whether you are buying a new or used car in Canada, you need to pay attention to what is happening in the broader economy.
Interest rates are skyrocketing to combat inflation, but it will lead to a moderate/severe recession in the next couple of years.
To get the best possible terms on a car loan and protect yourself from economic uncertainty, there are some important things you should keep in mind.
If you stick around to the end of this conversation, you will have all of the information you need to make the right decision.
Even drivers with great credit are feeling the pinch
Inflation has driven up the costs of everything, and Canadians are subsidizing these added costs with consumer debt, namely credit cards.
When you take on too much credit card debt, your overall credit utilization rate goes up, which puts downward pressure on your credit score.
When your credit score begins to drop, your costs of borrowing increase on everything from mortgages to car loans.
The only way you can protect yourself from this debt trap is to tweak your budget and try to find savings.
Car prices are adjusting to new normal
Last year, the pandemic and a chip shortage drove up the price of new and used cars.
It seems that used car prices in Canada have plateaued, but that is not the case with new vehicles.
Car manufacturers are forced to increase the retail prices of their vehicles. Inflation has impacted labor costs and raw materials, car manufacturers are not able to absorb these costs, and you, the consumer, will be forced to pick up the slack.
Lenders are becoming more conservative
The vast majority of firms that offer auto financing in Canada are revisiting their loan underwriting requirements. Since the costs associated with securing capital to fund these car loans have gone up, lenders are more sensitive to defaults.
This means that even borrowers with good to excellent credit are going to be paying a considerably higher interest rate than what you were even a year ago.
If your credit score is under 720, you need to start working on it to raise it as soon as possible. The longer you delay working on your credit score, the more it will cost you in the long run.
Where to find a decent car loan in 2022
The best source of competitive car loans in Canada will not be found online; your best option is to speak with a local car dealership that has been in operation for a considerable number of years and has a great customer satisfaction track record.
Whether you are buying a new or used car, the local dealership will be able to get you approved for car loans at the lowest possible interest rate.
Your next move should be to contact your local car dealership and start exploring your options.
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.