Car Loans For Young Drivers in Canada: How to Get Approved

Car Loans For Young Drivers in Canada: How to Get Approved

Posted on November 10, 2022

Turning 18 is a big milestone. You’re technically an adult and can now apply for credit cards and finance in your own right. Don’t rush into your first car loan though as there are some things you need consider before you jump in.

Can you really afford a car loan?

The first big question is, can you really afford a car loan? You may have considered the monthly payments but don’t forget about running costs, insurance, gas, servicing and those other expenses that cars come with.

When you’re calculating affordability, make sure to allocate enough money for gas and insurance, tires and all those other responsibilities that come with car ownership.

Think of the wider picture

You may not have any debt right now but what will the picture look like in a couple of years? Will you have student debt? Will you want to buy your own home? How will your circumstances change?

Nobody can foretell the future but hedging your bets to make sure you can afford to cope if things change will really help.

Building credit

The vast majority of young adults have no credit history, which usually means higher interest on car loans. As you’re an unknown quantity, any lender is going to err on the side of caution and charge higher interest rates.

These will gradually reduce as you build a reputation for paying on time but that process is measured in months and years.

Managing a car loan

You may have been managing phone payments on your own for a while but managing a car loan is completely different. For one, it’s more expensive. Two, it’s a serious responsibility and a long term commitment.

Some young adults find it difficult to get into the mindset that a significant portion of their monthly salary will disappear on a car payment. It’s something you get used to but you need to make sure you’re prepared!

Balancing life and loans

These are your prime years. A time when you want to go out, buy new clothes, visit new places and experience new things. Can you do all that while managing a car loan payment too?

Will you be okay not having vacations or fewer trips to the mall when you’re balancing your finances? Can you still experience life as you want while paying off a car loan?

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.