Car Financing For New Canadian Immigrants

Car Financing For New Canadian Immigrants

Introduction

One of the most appealing aspects of Canada is the sheer amount of diversity that has been seeing an increase in recent years, and shows no signs of slowing down anytime soon. Far from being a homogenous mass, the Canadian population nowadays come in every possible shape, size, color, and religion, which has been contributing to various areas of the state suddenly exploding with choice and culture. Take a walk through downtown Toronto, for example, and keep an eye out for how many different kinds of cuisine you might encounter. The more the merrier, of course — and as diversity continues to strengthen, the Canadian spirit itself only gets to be more profound.

A huge part of what has triggered such a cultural phenomenon in Canada is how friendly we, as a nation, are to our immigrants. Of course, no society is perfect, and there are always going to be a few bad apples around who take issue with anybody who is slightly different. On the whole, however, Canada has made it clear that anybody who wants to come and make a life here is more than welcome. Generosity of spirit has been a Canadian tradition for decades upon decades, and as the years go on, Canadians are only growing more accepting of each other and more keen to explore our common humanity as a population.

No matter how friendly an environment is to immigrants, however, for those people who are moving to a new country in order to begin a new life, there are a ton of potential areas to slip up. The vast majority of these are bureaucratic in nature, with paperwork stacking up and up for every possible important decision a new immigrant in Canada might find themselves making. Whether it’s getting a job, getting a residence permit approved, getting a visa, getting health coverage, getting a home — or organizing countless other important details — it can be a confusing thing, to try and figure out exactly which form needs to get sent where and by what deadline.

Where To Start?

Somebody ticking boxes with a pink highlighter.

Unfortunately, one of the single most important things you’ll need to do as somebody fresh to Canada’s shores (that is, securing car financing) is also one of the most finicky. Odds are you’ll need a car, unless you’re living in a built-up, metropolitan environment. Whether it’s for getting to and from work, hanging out with friends, or just going down the road to the grocery store, cars are vital for practically everybody trying to live a life in today’s fast-paced world. And cars, as we all know, are expensive.

There are some people out there who can save up enough money to buy a car straight from the lot in cash. This article isn’t targeted at those people. Rather, we’re interested in talking to new immigrants who are probably looking for a way to secure car financing. Because there are so many things to consider, it makes sense to present all of the most salient points at once, in one article — and that’s exactly what we intend to do.

Read on to discover the most important things to know about securing car financing as an immigrant new to Canada.

Documentation

Documentation is any bureaucracy’s bread and butter. By condensing everything into rigidly-defined, often complicated forms, complicated systems can be created which are capable of serving millions upon millions of people at once. Unfortunately, though, for each of these millions of people, the process of getting together all of the necessary documents can be a little stressful. There are a few pieces of paper in particular you’ll need if you’re going to be buying a car in Canada.

Driving License

The first, and most obvious, document you’ll need is a driver’s license. A common question we hear in relation to immigrants trying to buy a car is whether or not they can simply swap over their current license for a Canadian equivalent. After all, learning to drive is learning to drive, right? In theory, there shouldn’t be any great mismatch between being able to drive in one place and being able to drive in another.

The good news is that you might be able to change your own driver’s license for a Canadian one. This will depend ultimately on how much driving experience you have and where exactly you’re coming from, as standards vary from country to country hugely. No matter what, though, if you’re going to be able to exchange licenses, you’ll also need three other documents: A Canadian Citizenship card, your own driver’s license, and what’s known as an ‘abstract’. The abstract is basically a formal letter, created in the last few months, which hits a few important points. These are your name and date of birth, your driver’s license details (whether it’s still active, what kind of license it actually is, etc), the date you officially got your license for the first time, and a stamp from whichever organization or authority gave you your license in the first place.

Depending on where you’re from, you’ll need to go to a few different places in order to get your abstract. The best way to figure this out is to Google the procedure for your own country; there are simply too many different possibilities to list them in full in this article.

Insurance

Car insurance is required in order to secure any financing for a vehicle in Canada. You won’t be able to apply for car insurance before you have a Canadian license, however, so make sure you handle the first step of the process before you embark on the insurance journey. And it is quite a journey, make no mistake. For example, you’ll need to know details about the specific vehicle you’re trying to insure like registration number, model, and brand, as well as what kind of mileage has already been recorded.

Fortunately, while you won’t be able to complete this step of the process without all of the specific information, you should be able to go to one of a few insurance companies and get a rough ballpark quote in order to give you an idea of what you might be working with. Even though it can seem like a wasted trip, in reality it’s an important stage of the proceedings that must be adhered to in order to prevent any nasty surprises from appearing further down the line.

While a record of your driving history will certainly help you in your car financing journey as a means of getting the best deal possible, in Canada only Canadian driving records are counted. As a new immigrant without any prior experience driving on Canadian roads, therefore, you probably won’t be able to meet this requirement; but that’s okay, because it’s not necessary, just recommended.

New Vs. Used

A new red car sitting in a garage.

The famous new vs. used debate is rearing its head again, but don’t panic — we’re not about to rehash the story yet another time. Rather, we’ll just be discussing why it might be a better idea to go for a used car as an immigrant new to Canada. Of course, this is just a recommendation; you’re free to buy new or used as you please. There are some significant advantages to opting for a used car for your first Canadian vehicle, however.

The biggest of these benefits is the cost. Used cars are, across the board, less expensive than new cars. A large part of this is down to the fact that cars are depreciating assets, meaning basically that they start to lose value the second you turn the key in the ignition. As a result, cars which have been around for longer have lost more of their value, making them a better financial proposition for a lot of people, new immigrants included. Even though they can’t be leased, used cars typically qualify for much more favorable loan deals, which is definitely something you’ll want to keep in mind as you consider how to secure financing for your first car in Canada.

There are some downsides, too, but they usually won’t outweigh how much money you’ll save on the cost of the car. You probably won’t be given the complete history of the car with regards to mechanical or structural issues, whereas with a new car you’d have a warranty to protect you against any defects. You also might have to put up with outdated technological systems which have been improved and replaced since the automobile in question was manufactured. On the whole, though, these tend to be surface-level issues which are unlikely to cause serious problems further down the line, so it’s best not to be too afraid of them.

Credit

Lastly, your credit score is going to play a huge part in how you go about securing financing for a vehicle as an immigrant in Canada. In truth, credit plays a huge part for everybody, but for your situation it might be slightly more complicated. The main reason for this is that you won’t have any Canadian credit history at all, irrespective of what kind of credit score you had in your home country.

This doesn’t have to be the end of the world, though. There are lots of simple, straightforward ways you can go about building up a sufficiently decent credit score to get a workable deal from a dealership. The best method is to open a credit account and buy a few small things on credit. Next, you’ll want to pay these back in full and on time, or ahead of time if possible. Because you’ll be proving yourself to be a reliable buyer, your credit score will reflect that if you give it enough time. It’s vital, however, not to buy something you won’t be able to pay back in full and on time, because that would be working against your future credit score rather than helping to improve it.

Similarly, you can take out a small loan on something and commit to paying that back in full and on time. By chaining payments on a small loan together with a regular purchase, you’ll be creating a robust, well-rounded credit score that is likely to last you well into the future, and will work wonders when it comes to the kind of automobile financing you’ll be able to secure for yourself as an immigrant to Canada.

Conclusion

A Canadian passport lying on a table.

Even though it probably seems overwhelming at first, there really isn’t any reason you shouldn’t be able to have a good crack at getting yourself car financing as an immigrant. Canada, in fact, is one of the more flexible countries when it comes to helping immigrants out, with many of the relevant agencies known to work particularly hard in order to make a new arrival’s adjustment period as painless as possible.

At the end of the day, though, there’s simply no substitute for knowing the ins and outs of the procedures yourself. Knowledge is power, as the saying goes, and it’s important to always know exactly where you stand, especially when it comes to somewhat complicated bureaucratic processes.

As a final word, if you’re having a hard time getting approved for a car loan (whether it’s because you’re an immigrant new to Canada, a student with no credit score, or somebody whose score recently tanked because of identity fraud or financial mismanagement), send us here at carloans.ca an email, or give us a call. We specialize in helping people with less-than-ideal credit scores secure approval for loans, and we’d love to learn how we might be able to help you do the same.

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