Buying a car with cash isn't always the best option. Auto financing is an excellent way to fund the purchase, and qualifying for a car loan in Canada has never been easier!
The advantages of an auto loan are well documented:
- You don't have to dip into your savings or drain your available cash flow.
- You get to decide how much your monthly installment will be.
- You do not have to provide any collateral (besides the vehicle itself).
- You can get approved without a down payment.
- Your credit score will improve thanks to positive payment history.
- You'll own the car at the end of the term (compared to leasing).
- Nowadays, you DO NOT need a good credit score to get approved (more on this point below).
But where should you go for auto financing?
Finding the right option can feel stressful, especially when you don't know where to start! This quick rundown will help you determine the best path forward...
Where to get auto financing in Canada?
Traditionally, if you want to finance a vehicle purchase in Canada, car loans could only be obtained through a bank or dealership. But thanks to technology, there is a third option that's emerging as a convenient alternative. Let's take a look at all three options available today.
Bank lending
The traditional way to borrow money, when you borrow money directly from a financial institution, you fill out an application form and meet with the bank manager to discuss the loan. Bank officials look at various factors such as your income, savings, and credit score before making a decision about whether or not to approve you.
The frustration with bank loans is the back-and-forth with paperwork and face-to-face appointments before you get approved for the loan. And if your credit score is low, there is a good chance that your application will get declined. Auto loans from banks are generally only available to borrowers with good credit.
Dealership financing
When you apply for financing through the dealership, you usually pick out the car you want and then organize the financing. Your dealer will send your application to their in-house financing division or multiple external lenders (including banks) in the hopes of getting you approved for the car you want.
If you have good credit this can be a fairly painless experience, but if your credit is less than perfect there is a chance you will get declined. It can be frustrating and disappointing when—after weeks of car shopping— you cannot get approved for the vehicle they want.
Online pre-approval
Financial technology companies (like Canada Drives) allow you to get pre-approved for a car loan online before you even start looking at vehicles. Getting pre-approved will give you a better idea of what vehicle options you can afford, so you can shop with confidence.
Once you complete the online pre-approval form you will be connected with a local dealership in your area who will show you vehicles you qualify for. All you have to do is pick the one you want and drive away! It's the easiest way to get a great deal on a new or used car in Canada.
Simply fill out a quick application in under 3 minutes to get started.
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