A Guide to Getting a Car Loan in Ontario


Did you know that approximately 8.7 million Ontario residents own a car? That’s a ton of cars on the road! Even though there are many individuals who own a car, many aren’t fully aware of how car loans work in Ontario. If you’re considering financing a car in Ontario and want to learn more before fully committing to the purchase, you’ve come to the right place!

When going through the car financing process, there are four main things to consider: the cost, how car loans work, how and where to obtain a car loan, and your credit score. Knowing all of this information will help you make educated decisions during the car financing process thereby ensuring you get the greatest deal. Let’s explore all of these ideas below to ensure that your car financing in Ontario goes as smoothly as possible.

The Cost

cost calculation documents & coffee.

Before you start car shopping, it’s wise to take a few minutes to assess what costs you’ll incur and how much you can reasonably afford. Car loan payments are just one cost to consider, but there are several others too. To start, figure out how much room you have in your budget and what savings you have, then consider the costs associated with car ownership below.

  • Down payment.
  • Car loan payments.
  • Car insurance (Certain areas have higher rates than others. For example, Brampton has some of the highest rates in Ontario!).
  • Repairs and maintenance.
  • Parking arrangements (ie. street parking for cities like Toronto, parking at your home, etc.).
  • Vehicle registration fees, possible tickets and other miscellaneous fees.

If you can, get quotes or estimates for all of the above costs so you know what you’re getting yourself into. Remember, if you live in a big city like Toronto, these costs will be higher when compared to a small town. In addition, certain cars are more costly than others, a Mercedes will cost much more than a Toyota!

Car Loan Mechanics

A loan involves a lender extending a borrower money to make a purchase, then the borrower must repay the loan in full over a specified amount of time. With car loans, the car is typically held as security or collateral against the loan. This means that if the borrower were to fail to make payments towards the loan, the lender could seize the car and sell it to repay the loan. This is one of many reasons why it’s important to make your payments on time and in full!

Car loan payments are composed of both principal and interest payments. Principal payments go towards the actual loan balance. Interest payments go to the lender and is essentially the fee you pay to borrow money. The amount you pay every week, semi-week or month stays the same, but the breakdown of principal and interest changes. Interest is typically larger at the beginning of the loan’s term and gets smaller over time while the principal amount gets bigger. Once you pay the car loan off completely, the car is 100% yours and the only costs you need to worry about is insurance, repairs and maintenance and so on.

Obtaining a Car Loan

shaking hands over car loan agreement.

After you’ve found a car you want to buy, it’s time to obtain financing to complete the purchase. In general, you can obtain financing from a bank, dealership, credit union, private lender or alternative lender, like Car Loans Canada. All of these options have their own pros and cons, you might have to do some digging to figure out what they are exactly. Which type you choose will depend on your needs and what is most convenient to you. 

When you’re in the process of obtaining a car loan, you’ll have the opportunity to negotiate the interest rate, loan term and other terms and conditions. These considerations shouldn’t be overlooked because they can have an immense impact on your financial future. For example, do you really want to be paying a loan down for seven years? Probably not - these are the types of things you should consider when looking for a car loan.

Before proceeding with a lender, it’s wise to do some research on their online reputation. Even if you have all of the things you want in the car loan, you’ll still want to ensure you’re working with a genuine lender. Things can happen down the road, it’ll give you peace of mind to know that you’re working with a lender who can provide some flex if you need it.

Credit Score Considerations

Line of cars.

The good news is, there is no universal minimum credit score requirement to obtain a car loan in Ontario. That being said, many lenders still consider your credit score and report before extending a car loan. After all, they want some assurance they’ll get their money back, as you can probably understand! As a rule of thumb, a credit score of 650 or higher will ensure that you receive a car loan with no issues.

With a credit score below 650, you might have some trouble obtaining a car loan, but it is definitely not impossible. If this is the case, you’re best bet for obtaining a car loan is going through an alternative lender such as Car Loans Canada. Not only will the process of obtaining a car loan be quick, they will work with your poor credit situation to help you obtain the car you want. Alternatively, you can work on improving your credit score before applying with another type of lender, but this can take several months, or even longer.

Ultimately, credit determines how favourable your car loan terms and conditions will be. With good credit, you’ll get the best deals on the market and with bad credit you’ll have to sacrifice a little bit. The silver lining is car loans can improve your credit so long as they are managed responsibly. If you don’t get the best car loan offer now, you can work up to it!

Join Millions of Ontarians on the Road Today!

Happy person in her car.

Owning a car has its perks, commuting is more comfortable, running errands is more convenient and you can do more with your life. Although, the perks come with responsibility and obligations. If you’re ready to purchase a car, join millions of Ontario residents on the road today by applying with Car Loans Canada!

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