Should I Buy a Car During Inflation in Canada?
Should I Buy a Car During Inflation in Canada?
Posted on April 28, 2023
Inflation has driven up new car prices and you need to start exploring your options before you make you're car buying decision.
Prior to the onset of the pandemic, the average retail price for a new car was $45,000, but inflation has pushed that price much higher.
Not only are car prices rising, everything else costs more! This means that you will have less money in your budget you can allocate to a new car purchase, so you need to start shopping for a new car now.
Credit Markets are Tightening Up
The Bank of Canada has been pouring billions of dollars into the economy. This cheap money was great but now that we are dealing with runaway inflation, the bank needs to raise interest rates.
Source: The Daily
When interest rates increase, it makes everything more expensive from credit cards, mortgages, and car loans. Lenders get nervous when interest rates go up, and they tighten their underwriting requirements.
If you want to buy a car during inflation, it's recommended that your credit score is 680 or higher. Less than 2 years ago, you could get a great car loan with a 650 but those days are long gone.
Cleaning Up Your Credit
Interest rates are climbing and if you have credit problems, it will make everything more expensive. You can access your credit score and reports for free.
Spend a little time reviewing the reports and note whether there are any errors or overdue accounts. Overdue accounts are one of the most common reasons that your credit score would fall below 680.
This is a simple problem to solve, you should create calendar reminders or sign up for preauthorized payments. By always making your payments on time, your credit score will stabilize and eventually start to increase. Click here for some great tips on maintaining a good credit score.
Lenders are very diligent when it comes to income verification. To secure a car loan approval, you will need to provide the lender with copies of your recent bank statements. Your bank statements will show you all of the income that you receive on a monthly basis. Prospective lenders are going to take your monthly average and determine what is the maximum loan you can afford.
Accessing the Best Car Loans in Canada
To access the lowest rates in Canada when buying a car during inflation, you have to go to the source. Your neighborhood car dealership will have access to all of the major lenders throughout Canada.
The dealership is able to help you get approved for a car loan, even when your credit score is below the minimum 680. During your conversation with the dealership, they can show you what steps must be taken to raise your credit score.
Another great benefit of going through a dealership is having the ability to find the car of your dreams. There is a shortage of new cars in the market, so having the ability to get your car loan and car from the same dealership. Inflation is here to stay, so book an appointment with your car dealership as soon as you can.
If you're ready for a car loan in Southern Ontario, we'd love to help with that! simply fill in the form below to get started.
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