As a newcomer to Canada, you may require a vehicle to get around, especially if you have a big family or live in a remote area. However, given the high cost of vehicles, a car loan will likely be necessary. Unfortunately, newcomers to Canada have no Canadian credit history, which can be a hurdle to getting a car loan.
The good news is that many lenders offer car loan programs specifically designed for newcomers. Read on to find out more about newcomer car loans in Canada and what you need to do to get one.
Key Points
- Car loans are available to newcomers to Canada, despite a lack of credit history.
- Canada’s big banks offer car loan programs to newcomers with specialized terms.
- You can increase your chances of getting a car loan as a newcomer by working with an alternative lender or by building your credit history and making a bigger down payment.
Can A Newcomer Get A Car Loan In Canada?
Yes, newcomers to Canada can get a car loan. Many lenders, including big banks and online financial institutions, offer auto loans specifically for new immigrants.
These loans often don’t require good credit, making car financing accessible for those new to the country. Instead, these lenders look at other financial factors such as their income, assets, debt and job stability to determine a person’s ability to secure a car loan.
Where Can You Get A Car Loan As A Newcomer?
As a newcomer, you can get a car loan from a bank or an alternative lender.
Alternative Car Loan Dealers
Many alternative lenders offer car loans to newcomers to Canada, even without any Canadian credit history. These lenders are more flexible than traditional banks and customize their financing solutions to those with limited credit profiles, such as recent newcomers. More specifically, they tend to focus more on factors such as income, employment, and down payment instead of credit scores.
However, due to the higher risk of lending to those with no credit history, alternative lenders often charge higher interest rates and may require larger down payments. However, alternative lenders also tend to offer faster approvals and funding compared to traditional banks.
Alternative lenders may also be more flexible, allowing you to fund a car from a dealership or private seller.
Best Car Loans For Newcomers In Canada
| Amount | Interest | Term (Months) | ||
|---|---|---|---|---|
 | $500 - $50,000 | Up to 35% | 12 - 84 | Learn more |
 | $7,500+ | Varies | 24 - 96 | Learn more |
 | $500 - $35,000 | Starting at 29.99% | 9 - 60 | Learn more |
 | $500 - $10,000 | 12.99% - 34.99% | 9 - 60 | Learn more |
 | $5,000 - $40,000 | Varies | 12 - 72 | Learn more |
 | $5,000 - $45,000 | 4.90 % - 29.95% | 36 - 72 | Learn more |
 | Varies | 11.9% + | 12 - 84 | Learn more |
 | Up to $50,000 | Varies | 12 - 84 | Learn more |
Can You Get A Car Loan From A Bank As A Newcomer?
As mentioned, some banks offer specialized programs for newcomers to Canada to help them get a car loan. Here are a few to check out:
RBC Car Loans For Newcomers In Canada
RBC offers car loans designed specifically for newcomers to Canada. This program allows you to finance a vehicle without any Canadian credit history. You can apply for an RBC newcomer car loan at thousands of dealerships across the country and use the funds from your RBC car loan to finance your purchase.
- No Canadian credit history required
- Finance a new or used car up to 10 years old
- Loan terms up to 96 months
- Financing is available up to $75,000
- Flexible repayment options
- No early repayment penalty
CIBC Car Loans For Newcomers In Canada
CIBC offers car loans for newcomers to Canada. Through the bank’s Car Loans for Newcomers program, borrowers can access up to $75,000 to finance a new or used vehicle with loan terms up to 96 months. CIBC’s newcomer car loans are available through over 3,200 car dealerships across Canada.
- Up to $75,000 in financing
- Finance new and used vehicles up to 10 years old
- Loans available through over 3,200 car dealerships
- Loan terms up to 96 months
National Bank Car Loans For Newcomers In Canada
Newcomers to Canada can apply for car loans through National Bank with preferred rates, even without Canadian credit history. For car loans in excess of $10,000, you may qualify for auto financing with a 25% down payment.
- Loan terms up to 8 years
- No credit history required
- Flexible repayment schedules
- No early repayment penalties
TD Bank Car Loans For Newcomers In Canada
TD Auto Finance offers car loan solutions to newcomers with no Canadian credit within the first 5 years of living in Canada. Newcomers can finance both new and used vehicles at over 3,500 dealerships across Canada. Loan terms can be extended to 6 months, with loan amounts of up to $75,000 available.
- Loans up to $75,000
- New and used vehicle financing available
- Loan terms up to 60 months
- Financing available at over 3,500 dealerships across Canada
Scotiabank Car Loans For Newcomers In Canada
Scotiabank’s StartRight Auto Finance Program for newcomers to Canada allows you to qualify for a car loan without a Canadian credit score. Car loans are available at over 4,000 dealerships across Canada.
- Loans for up to $75,000
- Finance new or used cars up to 4 years old
- Loan terms up to 60 months
- Customize loan repayments
How Do Car Loans Work?
A car loan is a type of financing specifically designed to help car buyers cover the cost of a vehicle purchase. Here’s how it works:
- Loan Amount And Down Payment: You borrow a certain amount, typically after making a down payment to reduce the size of the loan.
- Interest Rate: The lender charges interest as a way for them to make money on the loan, which varies based on your creditworthiness.
- Loan Terms: You make regular installment payments over a set term, including principal and interest, until the loan is fully repaid. Car loan terms typically range from 24 to 96 months.
- Collateral: Car loans are a type of secured loan which uses the vehicle to back the loan. If you don’t repay the loan, the lender can repossess your vehicle.
Note: In most cases, you don’t directly apply for a car loan with the bank or alternative lender, instead, you would apply for a car loan directly with the dealership you’re buying the car from. They will get you financing through one of their partnered lenders who are willing to extend you a loan, which may include banks or alternative lenders.
Car Loan Requirements For Newcomers In Canada
Eligibility requirements for a car loan vary by lender. That said, the criteria that lenders typically look at include the following:
Credit Score
Lenders often examine a borrower’s credit score during the application and approval process. Good credit is generally required for a car loan, particularly when applying with a traditional lender.
However, for a new immigrant with no credit history in Canada, many lenders may place more emphasis on other factors, such as income and collateral, than credit score. These lenders may offer special programs to help newcomers obtain a loan to purchase a vehicle.
Learn more: What Credit Score Do You Need For A Car Loan?
Income
You’ll need sufficient income to cover your monthly car loan payments. Minimum income requirements may vary from one lender to another, though the minimum income generally accepted for an auto loan tends to range from $1,200 to $1,800 per month.
Debt
Lenders may also want to assess your debt level to make sure adding another bill in the form of a car payment won’t put you over the edge. More specifically, they may take a look at your debt-to-income (DTI) ratio, which is a measure of your debt relative to your income. Essentially, the lender will want to make sure that your income is sufficient enough to cover your existing debt, plus an additional car loan payment.
A DTI ratio is calculated by dividing your monthly debt by your monthly income. Then, multiply the answer by 100 to get a percentage.
| Example: Monthly gross income = $5,000 Monthly debt = $2,000 DTI = 40% ($2,000 ÷ $5,000 x 100) |
Lenders prefer DTI ratios to be no higher than 44% for car loan qualification, though some lenders may accept a higher number, while others may require an even lower figure.
Down Payment
A great way to increase your chances of getting approved for a car loan as a newcomer with no Canadian credit history is to offer a sizable down payment. Generally speaking, a down payment of anywhere from 10% to 20% of the car’s value is required. As such, you may want to come up with even more than this range to boost your odds of loan approval as a newcomer with no credit history.
Learn more: How Much Should A Down Payment For A Car Be?
What Documents Do You Need For A Car Loan As A Newcomer?
When applying for a car loan as a newcomer to Canada, you’ll typically need to provide the following documents:
- Driver’s License: A valid provincial government-issued driver’s license serves the following purposes:
- Proves your identity
- Proves that you’re over the age of majority in your province
- Proves that you’re legally permitted to drive
- Proof Of Residence: To show that you currently live in Canada, you’ll need to provide some sort of proof, such as the following:
- Utility bills
- Rent agreement
- Tax documents
- Proof Of Income: To show the lender that you earn enough to cover your loan payments, you may be asked for any of the following:
- Pay stubs
- Bank statements
- Employment letter
Can I Get Car Financing With A Work Permit In Canada?
Yes, you can get car financing with a work permit in Canada. Many lenders offer car loans for temporary residents. Like loans for newcomers, car loan requirements for temporary residents often focus on employment and income instead of your Canadian credit history.
That said, fewer lenders tend to offer car loans for temporary residents, and additional eligibility criteria may be necessary. For instance, these lenders may have specific requirements surrounding the following:
- Your employment status and income
- How long you’ve lived in Canada
- How long you intend to live in Canada
- Your specific visa (ie. work permit, student permit, etc)
- Your compliance with the terms of your visa
Can You Get A Car Loan As An International Student?
Yes, you can get a car loan as an international student in Canada. Like car loans for temporary residents and immigrants, car loans for international students work relatively the same way. In fact, international students may have a better chance of car loan approval than newcomers with temporary or seasonal work visas.
Lenders that offer these types of car loans often focus on employment status, income stability, and down payment in lieu of credit history.
Costs To Consider When Buying A Car In Canada
Before buying a car, it’s important to understand all the costs associated with this purchase to ensure it fits in your budget. Consider the following when buying a car in Canada:
- Car Sales Tax: In the majority of cases, sales tax applies to vehicle sales. Whether or not you pay sales tax and how much you pay depends on where you’re located, where you buy your car from, and whether you’re buying new or used. Generally speaking, sales tax can be as high as 25% (if buying in BC), which you’ll need to factor into the final purchase price.
- Registration Costs: Car registration costs vary by province and vehicle type, and can cost up to $100 or more.
- Vehicle History Report: If you’re buying a used car, it’s essential to get a vehicle history report (which can cost up to $100 or more) because it provides detailed information about the car’s past, helping you make a more informed decision. It reveals previous collisions, repairs, previous owners, odometer readings, and title liens.
- Dealer Fees: Dealership fees are extra costs added to the vehicle price when purchasing from a dealer. These may include administration/documentation fees, and freight and delivery fees, among others.
- Loan Costs: When you take out a loan to finance a vehicle purchase, you’ll need to factor in additional expenses, such as interest charges and lender fees. These costs can vary widely depending on the specifics of your loan.
How To Increase Your Chances Of Getting A Car Loan As A Newcomer
Since you have no Canadian credit score to contribute to your car loan application as a newcomer, you’ll want to take extra steps to boost your odds of loan approval. Here are a few things you can do:
Make A Bigger Down Payment
Making a bigger down payment can significantly increase your chances of car loan approval as a newcomer. The main reason is that more money paid upfront can reduce the amount you need to borrow, which in turn reduces the lender’s risk. This makes the lender more likely to approve your application.
Build Your Credit
While you may not have credit so soon after moving to Canada, there’s no time like the present to start building a Canadian credit history. With good credit, you can significantly improve your chances of car loan approval. Not only that, but you can also improve your odds of securing a lower interest rate and better loan terms, making your loan more affordable and manageable.
Learn more: New Immigrants: Establishing Credit
Shop Around
Compare loan offers from different lenders to find the most competitive rates and favourable loan terms that best suit your financial situation. Loans Canada’s CompareHub tool is a great place to start.
Other Ways To Buy A Car As A Newcomer
Besides a traditional car loan, there are other options to consider when buying a car as a newcomer to Canada:
- All-Cash Purchase: If you have the funds readily available, buying a car outright with your savings can be more affordable than financing. You can avoid the extra costs that come with a car loan, including interest and lender fees.
- Personal Loan: The funds from a personal loan can be used for just about any purpose, including buying a car. You can use the funds from a personal loan to shop as a cash buyer, whether buying new or used. This may be an ideal option if you’re buying from a private seller.
- Personal Line Of Credit: A credit line provides flexible and revolving access to funds that can be used for any purpose, including purchasing a vehicle. You can tap into the credit line as much or as little as needed, and you will only pay interest on the amount withdrawn.
- Lease: Leasing allows you to drive a new vehicle every few years and typically comes with lower monthly payments compared to financing.
Learn more: Is Paying Cash For A Car A Good Idea?
Bottom Line
While a lack of credit history can stand in the way of getting a traditional car loan, there are lenders and specialized programs available specifically for newcomers with no Canadian credit history. With a stable job, sufficient income, and sizable down payment, you may be able to qualify for a car loan to finance the purchase of a vehicle.
