buy car as an immigrant

How to Buy a Car in Canada with Bad Credit

Canadians with bad credit will always find it challenging to buy anything. Whether it’s a house or a car, bad credit is an ill wind that blows you no good. Fortunately for you, there are many ways you can buy a home with bad credit, but this piece will focus on how you can do the same for a car.

One thing you need to understand sooner rather than later is the importance of your credit history. Your credit score can make or break you, so if you have a bad score, you need to improve it now. In the meantime, we will reveal to you how to buy a car with bad credit.

Purchasing a Vehicle with Bad Credit

It isn’t mission impossible to buy a car with bad credit, but you’d face more difficulties compared to an individual with a high credit score. Your monthly rates are likely to be higher, the loan smaller, and for a cheaper vehicle. However, there are certain things you can do to sweeten the deal and make it easy for you to get a loan.

  • Review your credit score – you can do this every six months so you’d have adequate time to fix any issues that may affect your score.
  • Save more money – a bigger down payment goes a long way to convince your lender you’re committed to the cause.
  • Get Pre-approval – consult your bank ahead of time to see if you can get pre-approved for a car loan.
  • Scale down your preferences – target cars that are more affordable to secure a smaller loan.
  • Contact Bad Credit Lenders – quite a few lenders make it their business to approve loans to individuals with bad credit.

Purchasing a Vehicle with No Credit

It is one thing to have bad credit and quite another to have none. Both instances do not help your chances of buying a car. If you don’t have any credit history, banks will not be able to determine whether you’re reliable to make your payments or not. And the problem doesn’t blow away if you’ve got a reasonable well-paying job.

The dilemma of having no credit history is particularly applicable to immigrants who don’t have a credit history from home countries that do not partner with the Canadian credit system. One of the few solutions is to find a lender that specializes in working with new immigrants to Canada.

Build Your Credit

Sometimes, the best way to buy a car with bad credit or no credit is to build credit. Some of the ways to improve your credit include:

  • Paying off your bills when they are due. This includes your phone bills, utilities, internet, as well as rent.
  • Pay off all outstanding loans.
  • Desist from piling up new debt on top of old ones.
  • Register a new bank or credit account with small limits while paying them off on time and staying within limits.

Applying for small loans within reasonable limits is an excellent way to build a credit history from scratch. They are far within your reach than a loan for a mortgage.

Your Earning Power

A lender may indeed reject your car loan application if you have a good job coupled with bad credit. But this is not always the case. It is still possible to purchase a vehicle with bad credit. Some lenders choose to look at other criteria apart from your credit score. You’d be halfway into buying your vehicle with a good job and meeting the minimum income requirements.

Some of the documents you may need to provide include:

  • Proof of Employment
  • Drivers License
  • Bank Statements

Get a Co-signer

You can offset the chances of getting your car loan application thrown out by getting a co-signer. A co-signer is an individual with a good credit score, and who undertakes to make your payments in the unlikely event you stop paying. Canadians typically ask their parents or close relatives to co-sign on their behalf. A co-signer is excellent for your cause because you’d pay far less in interest rates while having a better chance of getting approval. However, it’s a considerable risk to the co-signer. It isn’t unusual for co-signers to request the title deeds to the vehicle in their name.

Go Loan Shopping

Traditional lenders are not generally keen to do business with individuals with bad credit. This means you’d have to go out of your way to find a car loan that suits your needs. By shopping around and comparing prices, you can find a loan term that’s best suited for your budget.

Some of the places to consider before you go loan shopping include:

  • Credit Unions – you can shop for car loans at credit unions local to you. Credit unions typically offer lower rates compared to the more traditional lenders.
  • Your bank – because you already have a relationship with your bank, they may be more inclined to give you a listening ear and consider your car loan application.
  • Online Lenders – there are quite a few online lenders on the internet that offer auto loans. You might have to do a bit of searching to find what’s suitable for your situation.

Used vehicles on Craigslist

Canada has a healthy online marketplace where you can get just about anything you can think of. It is possible to buy a car for dirt cheap on online platforms like Craigslist and Kijiji. However, you’d need to keep your eyes peeled and stay smart, so you don’t get scammed. If you’ve never bought a vehicle online, you can try this strategy to ensure you don’t have a bad experience.


Who says you need financing to buy a car? The best way to buy a car with bad credit is to pay cash. But if you don’t have the financial muscle to do so, the tips above will help you to purchase the vehicle you need no matter how dire your credit situation might be.

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