We have an essential guide for newcomers and immigrants in Canada who want to purchase their first car. And with the country of Canada taking in 1.5 million immigrants per year, we’ve had the discussion so many times of people who are struggling, the struggles of taking car loan as a newcomer, and building their credit. So we wanted to make this blog to educate you and help you navigate some of these snowy roads so you can have a smooth drive and easy transition to Canada and get your car.
1. Understanding Credit in Canada:
It’s important to start with the basics and that’s understanding your credit in Canada because your credit history plays a significant role in all the financial transactions. Having a strong and established credit history will help you secure the lowest interest rates when you’re shopping for things like mortgages, credit cards, lines of credits, business loans, applying for rental applications. Your credit score is like your financial report card. It reflects your borrowing and your payment history.
2. Steps to Increase Credit:
Open a bank account upon arrival in Canada. Having a bank account is going to show financial stability and it’s essential for you to be financially responsible.
Apply for a credit card. There are lots of credit cards that are designed for newcomers that most of the Canadian major banks have. RBC, Scotia bank, CIBC, all those ones, Capital One, has specific credit cards that are designed for newcomers to start building credit at Canadian financial institutions. These credit cards are easier to qualify, so just make sure you bring your proper identification with you. Maybe call the bank to set up an appointment or try to apply online.
Utilize your credit card for small purchases and ensure timely payments, aiming to establish a positive credit history. And things like gas or groceries, $100 here, $100 there, that you can go home and quickly pay off is going to help build your credit history.
It’s important to note that the two registered Canadian credit bureaus is called Equifax and TransUnion. And they recommend that you only utilize 30% of your available credit. So what that means is if you have a $300 credit card that you’ve been approved for, you don’t wanna max it out at $300 each time.Like we said, 30%, well that’s actually 33%,
Showing that you have credit available but you’re not using it is an effective process to build your credit score. This process is going to take you about maybe eight months to a year to establish a prime interest rate. And the score you need to get a prime interest rate here in Canada is about 700. So we know this can be a slow low process, but we would recommend don’t start applying for car loans until your score is established.
3. Preparing for Car Purchase:
Conduct thorough research on the type of car, budget considerations, insurance, fuel costs, and maintenance.
Opt for a modestly priced vehicle, ideally around $25,000 or less, and consider making a substantial down payment of approximately 30%.
Alternatively, explore the option of having a cosigner with a strong credit history(a cosigner is someone with stronger credit who is going to vouch for you), albeit cautiously, to increase approval chances.
4. Navigating the Car Buying Process:
Identify reputable local dealerships and trustworthy salespersons specializing in financing for newcomers.
Schedule appointments to inspect and test-drive selected vehicles after reviewing their Carfax reports. Make sure you find a trustworthy dealership. Read their reviews.
Avoid indiscriminate online loan applications, as multiple credit inquiries can negatively impact your credit score.
5. Consider Pre-Approval:
Explore the possibility of pre-approval through dealerships to ascertain your eligibility for specific loan amounts, preventing potential disappointments.
In conclusion, purchasing your first car as a newcomer in Canada can be a daunting yet rewarding experience. By comprehensively understanding credit principles, diligently building your credit history, and navigating the car buying process strategically, you can enhance your chances of securing a favorable car loan and reliable transportation. Remember to conduct thorough research, exercise financial prudence, and seek guidance from trusted professionals to ensure a smooth transition. We at Cars Unlocked are dedicated to assisting you in achieving your automotive goals. If you found this video helpful, don’t forget to like, subscribe, and leave your comments. Stay tuned for more insightful content, and until next time, drive safely!
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