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.
Of course, supply and demand is going to play a large part in how exactly every given dealership goes about trying to shift its used cars. In college towns, for example, students are much more likely to purchase second-hand cars than they are new cars, which will probably work to drive up the price even more. In that case, interest and the terms of the loan are going to grow in importance, since (as we’ll elaborate on further down) one of the most important aspects of any credit decision is just how big the overall ticket price actually is for the item.
This doesn’t mean that you can afford to ignore interest and loan terms completely; rather, it’s a way to remind you that at the end of the day, percentages are always going to have a close relationship with the item’s overall value, and it’s best to consider these kinds of financial decisions as objectively as possible when you’re weighing up which is the best way to proceed in your particular situation.
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. If you’re keen to hit that incredible score, by all means, get going on the process. We’re the last people on Earth who will discourage you from getting an excellent credit score; we know first-hand just how important it can be for these major financial decisions like securing auto financing for a vehicle in Toronto. Just make sure that it doesn’t completely overpower every other aspect of your life — building up your credit can (and should) be fun!
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.
Playing It Safe
Getting auto financing in Toronto is a serious decision, and one which is likely to have a lasting impact on the way you live your life. For that reason, you may all want to be sure that you’re within the ‘reasonable’ range of credit scores. Since it’s something you’re going to be living with for (hopefully!) many years to come, there’s no point in trying to really push the boundaries when it comes to what kind of credit score you’ll be able to get away with. Of course, that doesn’t mean that you should forget about it completely if your score isn’t ideal; here at autoloans.ca, we’re all to help people in all kinds of unfortunate credit situations secure auto financing in Toronto, so it’s hardly the end of the road.
Still, though, plenty of people want to play it safe when it comes to such heavy financial decisions. But what exactly does playing it safe mean? And how are you supposed to go about deciding to what extent you’re pushing the limits and to what extent you’re living within your means?
After all, one man’s Prime is another man’s Superprime. Perhaps the best way to think of the various credit score ranges isn’t as a series of distinct categories, but as location markers on a grander spectrum. Rather than getting too hung up about which category you fall into (because they’re not even the same across every company, and plenty of credit bureaus disagree about which scores to include in which categories, further increasing the confusion for everybody involved), it might be a better idea to consider where you’d like your credit score to be at considering your station in life and what you’re currently living like.
For example, the credit score a college student working part-time would like to have is going to be drastically different to the kind of credit score a high-powered CEO is going to require. Similarly, credit is going to play a much more important role in the CEO’s life. That’s why we’re going to suggest that one of the main things you consider is exactly what you need out of your credit score at the moment. Everybody should be able to play it safe, in theory; it’s often just a matter of figuring out where exactly that ‘safe’ benchmark is actually situated.
The Size Of The Figures Is Important
This is another important thing to take into consideration as you begin trying to decide what kind of credit score you’re going to need in order to secure auto financing in Toronto. Continuing to run with our CEO vs. college student example from above, in the following few paragraphs we’ll be briefly discussing how important the overall size of the figures involved is, rather than just sticking with percentages.
If the vehicle you’re trying to secure auto financing in Toronto is a six-figure supercar with a hungry V8 underneath the hood, you’re going to want to make sure your credit score is as good as it can possibly get. As a matter of fact, in this case the credit score is going to be so important that even a few percentage points can turn into a difference of thousands of dollars, meaning that you’ll need to spend a lot of time working on credit building / credit repair techniques to make it worth your while. If that’s the case, you’d be well advised to take exactly which category you currently fall under very seriously indeed.
Compare that with, on the other hand, the college student who may be simply trying to secure their first used car as a means of getting to and from their job. There’s no chance on Earth that this particular vehicle is going to cost anywhere near the same amount as the CEO’s super-powered machine — it’ll most likely be a fraction of the overall price. In this case, a few percentage points here and there isn’t going to end up breaking the bank, and there’s not the same imperative to stress over exactly how great your score is.
Don’t get us wrong — we don’t mean to suggest that financing is somehow less important for smaller-value items, or that everybody can afford used cars equally easily. Rather, the main takeaway from this section of the article should be that it’s important to keep things in perspective when you’re thinking about any significant financial decision, and getting auto financing in Toronto certainly qualifies as being significant.
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.