Buying a Car During the Recession in Canada: Is it a Good Idea?
Buying a Car During the Recession in Canada: Is it a Good Idea?
Posted on September 12, 2022
Everyone was wondering when the Bank of Canada would raise interest rates, and it has finally happened. It moved the prime interest rate up by twenty-five (25) basis points which is not a lot, but it sends a profound message to the financial markets around the world, the days of cheap money are gone, so can you wait and buy a car in a recession or should you do it now?
Inflation caused by the pandemic and the Bank printing massive amounts of cash to keep the economy going has created a tremendous amount of financial pain for the average Canadian. Inflation is at 5.1%, and gas is nearing $2.00/L!
Car prices are on the move
If you're trying to buy a car in a recession, you're looking at a median cost of about $50,000, and that is for a modest sedan or SUV, luxury vehicles prices are at all-time highs.
If you thought you could get a good deal by going buying a used car, we hate to break it to you, but the sheer number of used cars has dropped.
Vehicle Prices over the years. Source: edmunds.com
The lack of cars is caused by a lack of new cars being produced; carmakers cannot produce enough cars because they cannot get the microchips.
Car buyers are facing a dilemma where they can wait a few months to take delivery of the new car or buy a used car right away.
This issue is going to last for a year or longer, so you need to start shopping for a vehicle now.
Lenders are more risk-averse than usual
Covid-19 has forced everyone to adjust the way they do things; this includes companies that offer car loans.
Unfortunately, lenders that offer car loans are worried about giving loans to consumers who are not able to keep their commitments.
Having a good credit score is not enough; your income must be sufficient and verifiable, or the lender will reject your application.
For example, in the past, you could get a good car loan with a 650-credit score with no income verification, but now, you need a 720-credit score.
Addressing your credit issues
If you have credit issues, you will need to start working on them immediately. Lenders are adjusting the rates they are charge because of the recent Bank of Canada interest rate increase. If you'd like to learn and have a head start on rebuilding credit, click here.
The secret to having a good credit score can be summed up with two (2) simple steps, always pay your bills on time and never carry too much debt. By following this approach, your credit score will recover, and you will be in good shape.
How to get the best deal on a new vehicle
Buying a car is a major financial decision and not something you should attempt on your own. Your best option is buying your car through a local dealership.
2022 Dodge Charger available at Unique Chrysler in Burlington
The dealership will be able to help you find the most competitive loans throughout Canada; this means you are going to save time and money.
By working with the dealership, you will be able to pick and choose the vehicle you like from whatever the dealership has in its inventory.
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.