Financing Frequently Asked Questions

What financing rates you can get for a loan on our used vehicles depends on a number of factors. The main factors are your credit score, financial situation (income, housing situation, etc), the length of the car loan you want, and the model year of the vehicle you want to buy. We pass that information on to the car financing companies, who will then approve or disapprove of the loan based on your credit score and the amount you want to finance. If your loan application is approved, they will also include the terms interest rate for that loan.

There are two main reasons for this. First, used car financing tends to be riskier than new car financing. Secondhand cars come with a greater risk of breakdowns, and if that happens before the end of the loan that affects how it is paid off by the owner which in turn affects its value. Used cars also tend to be financed by people who are not as secure financially — if you could afford to buy or finance a more expensive new vehicle, you probably would. The higher interest rates for used cars exist to mitigate these risks for the financing company.

Secondly, car manufacturers offer a lot of incentives to buy their new vehicles, including lower lease and loan rates. They don’t do that for used cars because they get no profits from used car sales, which means interest rates for used car loans are higher.

Your credit score is a representation of how much risk you present to financial institutions when it comes to paying off any loans or debt. It is used when you try and take out a line of credit, credit card, car loan, mortgage, and so on. You will have a file that is accessible by financial institutions that includes everything relevant to establishing your credit rating, including:

●    Your current financial information — account balances, credit limits, etc

●    Your payment history — for all credit cards, lines of credit, loans, mortgages, etc

●    Your identification information — name, address, age, social insurance number, current job, employment history, relationship status, any dependents, etc

Your credit score will be lowered by things like divorces, missed payments, not having a current job to provide you with regular income, and so on. This information is kept on your credit file in Canada between 3 and 6 years, depending on the specific information.

You can build and improve your credit score by taking out small loans and starting a history of making regular monthly payments for things like utilities, cell phone bills, and a credit card with a small limit. The more you make payments for credit, the banks will increase the limits on how big of a loan or credit limit they will give you and how low an interest rate they will grant for new loans.

Credit scores in Canada range between 300 and 900. A score of 300 usually represents people who are just starting to build a credit score (students, newly arrived immigrants, etc) whose reliability in paying back loans is still relatively unknown. A score of 900 is the best possible score, for someone who has a long history of exemplary and high-level credit reliability.

When you apply for a used car loan, all of the information on your credit file is requested from the credit bureaus, who then send back your credit score to show how much risk they believe you represent in paying off a loan. Having a higher credit score means you will be offered lower finance rates and higher limits on your loan, so you can finance used cars that are more expensive. Having a lower credit score means you are perceived to be at greater risk of failing to make payments in the future, so you will be offered lower limits and higher interest rates on a used car loan. 

There are a few ways to lower the interest rates and monthly payments you make on a used car loan:

●    Make a higher down payment at the time of purchase

●    Trade in an old car at the same time and use the value towards the payment

●    Have a shorter-term loan

●    Finance a used car with a lower price

●    Have someone with a better credit score co-sign the loan

Co-signing a car loan is a great way for people with bad credit or no credit to get a better interest rate, but does come with risk to the co-signer. If you miss payments or default on the loan, the co-signer will be on the hook for the payments and might have their credit scores affected. That’s why co-signing loans works best with lower-limit loans on less expensive used cars to help build your credit score.

We do give used car loans to people who don’t have the cash to make any down payment at the time of purchase. However, the less of a down payment does affect how high your interest rates will be, and therefore how much you pay in monthly interest payments on the loan. It is not ideal if you can afford to make any type of down payment, but we realize that sometimes circumstances will prevent people from being able to make one who still needs to finance a used car.