Financing Frequently Asked Questions

Have questions about how the used car financing process works? We answer the most commonly asked questions we receive from customers about car loans, credit scores, and more. If you don’t see the answers to all of your questions you can contact us at any time, and our dedicated finance team will be happy to help!

What are used car loan rates right now?
When you apply for a used car loan there is no single interest rate available for every person on every vehicle. What interest rate you can get depends on a number of factors, such as:

  • What your credit rating is
  • How much regular income you currently have
  • How many years the loan lasts for
  • How much money you put towards a down payment
  • How much your trade in is worth (if you have an old car to trade in)

You include some of this information in a used car loan application, which is sent to car financing companies. They pull your credit file, and based on the combined information they will decide on an interest rate that reflects how “risky” they think you represent in making all future payments.

How can I get a lower interest rate on my used car loan?
If you want to get a lower interest rate on a used car loan in order to lower your regular payments, you can do it by:

  • Making a larger cash down payment to reduce how much of a loan you need
  • Apply for a loan with a shorter term in years
  • Buy a less expensive car so the amount you need loaned is lower
  • Get a co-signer with a good credit rating to mitigate the “risk” to the financing company

Co-signing a car loan is more complicated process than having a single applicant, and it does carry some risk to the co-signer. It can be very helpful for people who are just starting to build their credit score, such as young adults with no credit history having their parents co-sign their first car loan. Make sure you and your co-signer fully understand how it works for both of you — you can contact us to ask questions you might have!

Can I refinance my current used car loan?
You can refinance your used car loan with us, depending on your circumstances and the state of the current loan. If your credit score has improved since the start of the loan, and there is still enough term and money left to pay on the loan, you could be eligible to have the loan refinanced to reflect your new credit rating so you have a reduced rate and payments to make. If you want more information about how this works, or to know if you can refinance your current used car loan with us, you can give our finance team a call.

How does credit score work for financing a used car?
In Canada, every person can have a credit score. You will have a credit score once you start building credit history by having a credit card, small loans, and other regular monthly payments tied to your personal account and social insurance number. Your credit score is a number between 300 (a “bad” score) and 900 (the best score) that represents how reliable or risky you might be at paying off any current or future loans. Used car financing companies use your credit score to decide if they should approve or disapprove a loan application and what interest rate they should charge.

When you apply for a used car loan, the financing company will take the information in the application, mainly:

  • The terms of the loan — how long, the total amount that needs to be loaned, etc
  • Your gross income — how much money your job(s) pay you per month before taxes and other deductions
  • Your housing situation — how much money you pay per month in rent or mortgage payments

They will then pull your credit file from the credit bureaus to see your credit score to know how reliable your recent history is. If you have a better credit score, you will be able to get used car financing with lower rates and higher loan limits. If you have a worse credit score, or no credit history, you will only be approved for a small loan amount with higher interest rates until you prove you can reliably make monthly payments.

How can I improve my credit score?
If you are a young adult just starting to build a credit history, or if you have a bad credit score, you can increase your rating by starting to consistently make payments on things like:

  • Utility bills — cell phone plan, electricity or gas, etc
  • Housing payments — apartment lease or house mortgage
  • Credit bills — credit cards and lines of credit
  • Loans — car loans, student loans, etc

Making these payments consistently on time helps show credit bureaus and financing companies that you are reliable rather than risky. It’s normal for people to start building their credit by taking out a credit card with a small limit, and slowly increasing the limit over time.

There are other things that help improve your credit score by showing that you can easily make loan payments, including:

  • Paying off any outstanding debts or loans so your income is not tied to any other regular payments
  • Having a long-standing job that pays you enough money to easily cover loan payments
  • Having no personal circumstances that would affect your ability to make payments, such as a divorce, bankruptcy, and so on.

If you want any more information or help on how to improve your credit score for a car loan, you can contact us at any time.

Can new immigrants or international students get used car financing?
If you are a newly arrived immigrant or international student who has no credit history in Canada, getting a used car loan approved is more difficult but not impossible. How much of a loan you can get will be more limited, and your interest rates might be a bit higher, but it really depends on other circumstances aside from your credit rating, including:

  • If you already have a job that gives you consistent payments to cover the loan
  • If you can get someone who has a good credit history to co-sign the loan
  • If you apply for a small car loan for a less expensive car that is easier to pay off

Some banks and government programs exist to help immigrants and international students ease their transition to living in Canada. Some of them also help make it easier to get a car loan, or quickly build your credit history so you can more easily afford one.