What Should Your Credit Score Be To Get A Car?
Although the topic of how great your credit score should be to get yourself an auto financing deal in Toronto is divisive—with everybody online offering up their own opinion, making it that much harder to find out what the truth is—there are a few general guidelines which can be good to follow when it comes to trying to work out where exactly your credit score should be as you work towards securing yourself a car loan.
Before we get into what the ideal credit score range is to secure approval for auto financing in Toronto, however, we need to have a quick discussion of how your credit score is going to affect the car deal in the first place. Once we understand that, it’ll be much easier for you to come up with a range which is feasible for you to pay off given your current financial situation.
Basically speaking, the way a credit score will affect your auto financing deal in Toronto has to do with two factors: interest rates and loan terms. The interest rates will increase as your credit score decreases, just as the loan terms will generally increase in the same manner. This essentially happens as a way to reduce the risk for the lender from whom you’re trying to get approval for your auto financing plan in Toronto.
Another thing to take into account is what kind of vehicle you’re trying to buy. Because they’re less reliable (and because they often come with their own host of potential issues), used cars typically require a much lower credit score for a buyer to qualify for a deal than new cars.
A different way of thinking about this is the fact that dealerships will usually be more ready to offload used cars than new cars, given that used cars are trickier to sell. As such, they’ll be willing to consider a lower credit score range than they would be with their new cars, where the prices are higher and any risk the lender takes on is greater as well.
With that out of the way, let’s get into the discussion of what credit score range you should be aiming for as you try to get yourself approved for auto financing in Toronto. We’ll be looking at both used cars and new cars, in order to increase the amount of help this article will be able to provide you as you continue in your efforts to finance a new automobile for yourself.
Is There A Minimum Score I Need?
First of all, it makes sense to consider whether there’s a minimum credit score that is required to secure auto financing in Toronto. The answer to this question is basically that no, there is no minimum required, but that doesn’t mean you should be breaking down the door of every dealership in order to get yourself a bad credit car loan.
In contrast to autoloans.ca, many dealerships aren’t overly concerned with helping people with poor credit scores secure auto financing in Toronto, and as such you run the risk of predatory lending practices which will only serve to sink your finances even further.
The lower the score, the higher the interest rate will be. And if you have a score around 550, or even lower, you can expect to a secure nothing but the highest rates of interest from most lenders who will be ready to approve you in the first place. With that in mind, it’s easy to see that the best option isn’t necessarily to aim for the minimum but to go for the lowest reasonable range that will help you out with your auto financing plan in Toronto.
On the other hand, you don’t want to wait too long, either. Building up an incredible, 750+ credit score can take a long time, and if the car is a matter of necessity for you, that won’t be a workable option.
The ranges we’re going to suggest in the next paragraph should as such be considered rough guidelines, which you can err on either side on depending on your own particular financial situation. Cookie-cutter advice isn’t much good to anybody since you’re the only person who knows your own financial health to the required degree of specificity.
Recommend Credit Score Ranges For New And Used Cars
For a new car loan, you’re probably going to want to get a credit score of between 650 and 750. Granted, this does sound very high, and we realize that it won’t be an option for many working adults out there. However, we’ve chosen this range as a way of giving you a rough benchmark that won’t break the bank, but also won’t require you to wait for years to even apply in the first place.
Used car loans are less risky for the dealership, and as a result, the range you should be aiming at is between 600 and 700, although you can probably reasonably go as low as around 575 or 550 before you start to experience diminishing returns.
With a credit score in that range, you shouldn’t have a problem securing auto financing in Toronto, although it may take some time and some window shopping in order to find the right lender—but that’s alright because you should be shopping around for the best deal anyway. It’s a great financial habit to get into that is sure to pay dividends down the line, so the sooner you can train yourself to do it, the more your bank account (and your credit score) will thank you later on.
In conclusion, there are a couple of rough ranges you should be trying to get your credit score to fall into as you attempt to qualify for a car loan. We’ve called on all of our experience to come up with these guidelines, and although we always encourage people to carry out their own research, these ranges can serve as a perfectly good ballpark all on their own.
If you can’t seem to find yourself auto financing in Toronto because of a bad credit score, send us here at autoloans.ca an email. We consider every application for a loan we receive, and we just might be able to sort things out for you.