Wouldn’t it be wonderful to walk onto a car lot, pick the automobile of your dreams and get approved auto credit without any complications? For some people, that’s the way it happens. For many others, getting approved for automobile financing often includes a few challenges, especially if the person’s credit is not great.
Is Good Credit Important?
Good credit is important because it makes getting financing easier and can help you get lower interests rates on loans. That does not mean people with bad credit will be forced to pay cash for all purchases until their credit score improves. If that was the case, people with bad credit would rarely buy anything more expensive than groceries or clothing.
Having a good Beacon score does not mean having a pile of money ready to spend on a new or used car whenever the desire strikes. In fact, research shows the average Canadian household has to work nearly 24 weeks to make enough money to buy a car. That means good credit or bad credit, when it comes to major purchases, such as automobiles, nearly everyone needs financing.
Your Credit Score
• 780 – 900 Excellent
• 720 – 779 Very good
• 680 – 719 Good
• 620 – 679 Average
• 580 – 619 Poor
• 500 – 579 Bad
• Under 500 Terrible
How Credit Scores Affect Car Purchases
Automobile dealers love selling vehicles to people with excellent credit. They appreciate customers with good credit. Many of them accept customers with bad credit. The bottom line is that automobile dealers are in the business of selling cars. Whether they finance the vehicle or the customer is financed through a bank or other type of lender, selling vehicles is the goal. That means even people with low Beacon scores can get approved auto credit.
What customers find out when they get to the dealership is that their credit score affects the interest they pay on the auto loan. The higher the credit score, the lower the interest rate. However, that does mean you have to accept whatever interest rate is offered. Lenders may offer a higher interest rate to see if you will accept it, but you may actually qualify for a lower rate. Since down payments, vehicle trade-ins and other factors are also considered in the automobile financing process, you may be able to negotiate a lower interest rate.
Getting a Car
Just in case you’re not convinced that lenders want to make a deal with you, consider these statistics on new vehicle sales in Canada for recent years.
• 2012 – 1.67 million sold
• 2013 – 1.71 million sold
• 2014 – 1.85 million sold
• 2015 – 1.898 million sold
Additionally, hundreds of thousands of used cars are also sold annually. While many of these car buyers have good, great or excellent credit, many more of them have fair, poor or even bad credit.
Lenders are aware that consumers with lower credit scores represent a greater risk, but when they consider other factors, such as employment and down payment, the risk factor is lowered.
Approved Auto Credit
Bad credit does have limitations, but it does not ruin your chances of purchasing a new or used car. Accept that you don’t have good credit at the moment, which means you will likely be offered a higher interest rate, but don’t allow that fact to keep you from getting the car you want.
Go auto shopping with the knowledge that lenders are more than willing to help you get approved auto credit.