If you have bad credit in Canada, it can be difficult to pick out a great used car that you can actually afford. High interest rates and other fees can really eat into your budget, so it can be hard to understand what you can actually afford.
This is especially dangerous if you have a bad credit history. After all, the last thing you want if you have bad credit is to have your car repossessed – further damaging your credit report.
But don’t worry. With a couple simple guidelines, a little bit of common sense, and some basic information about the car-buying process, you can find an awesome used car that’s perfect for your needs – no matter how bad your credit score may be.
Follow these 5 steps, and you’re sure to find a fantastic deal on a great car.
1. Set A Reasonable Budget
This should be the first step in any major purchase – including a car. Begin by calculating your take-home pay after taxes. How much are you spending on rent? Food? Gas? Auto insurance? Utilities? Past-due bills?
You need to take a deep look at your finances, and calculate the total amount of money you can spend on a car payment per month. If you go shopping for a car before you set a reasonable budget, you risk overpaying, and getting locked into a loan that you can’t repay.
So take stock of all of your outstanding debts, monthly payments, and other financial information. Be honest with yourself – can you afford a used car right now? Or should you focus on paying other bills?
If you figure out your total budget for a used car, and you have enough money to make ends meet and to afford a car payment, congratulations! It’s time to move on to step 2.
2. Calculate The Total Cost Of The Car – Including Interest
One of the biggest mistakes you can make when shopping for a car is not taking interest into account when making your purchase. If you have bad credit, you’re going to have a high-interest loan – that’s just how the world works.
You can expect an APR of 18-25% if your FICO score is below 620, and you must take these high interest payments into account when you’re setting a budget for the total cost of your used car.
Here’s a quick example. Someone with fantastic credit gets a 3 year, 7% APR loan on a $10,000 used car. This person will pay a $309 monthly for a total of $11,116 over the 36-month loan term. That’s the true total cost of the car.
But say this same person has bad credit, and has an APR of 25%. That’s going to make monthly payments higher – so the loan terms are extended to 48 months. The monthly payment is still reasonable – around $332 per month – but the total cost of the car is now nearly $16,000!
You should always factor in the cost of interest rates when budgeting for a car. In the above example, the person with bad credit could get an $8,000 loan for 36 months, with a $318 monthly payment – and the total cost of the car would be $11,451, a much more reasonable sum.
3. Adjust Your Expectations
If you have bad credit, you should adjust your car-shopping expectations accordingly. This doesn’t mean you can’t find an awesome car – just that you’re probably not going to be able to buy a late-model car, or find a vehicle from a luxury brand. Your car is going to be great – but it’s not going to be a Porsche.
You should search for cars accordingly, as well. Look for well-maintained cars that are around 5 years old – these can easily have 10-15 years of life left in them, and are much more inexpensive than recent model-year cars.
If you adjust your expectations and search for the right cars, you’re sure to find one that you love.
4. Ignore Unnecessary Luxury Features
It may be tempting to shell out for leather seats, a sunroof, Bluetooth connectivity, and other luxury features – but this is usually a bad idea if you don’t have good credit.
Every penny you spend on luxury features is a penny you could spend towards a car that’s higher-quality, has fewer miles on it, or is in better shape. You’re not buying your car because you want to live a luxurious life – you’re buying it because you need reliable, inexpensive, and reasonable transportation.
So don’t shell out big bucks on unnecessary features. Use that money to find a car that’s a bit newer, or has fewer miles on the drivetrain.
5. Make Sure The Car Is In Good Shape
If you have bad credit, you’re going to want to be absolutely certain that the car you’re buying is in good shape. This is because you may have difficulty paying for repairs – especially if you’re in debt, and already paying multiple bills.
Most used car dealerships will provide you with a report about the car’s health from a service like CARPROOF, and if they don’t, you can run your own search with the vehicle’s VIN. The report will tell you if the car has had any major accidents or repairs, and can be a good way to assess the overall health of a vehicle.
You should also get the car inspected by a third-party mechanic. It may cost you a bit of money to do so, but it’s worth every penny to avoid any potentially catastrophic mechanical issues that the dealer may not have mentioned – or may not have known about.
If the car is in good shape, on-budget, and you can afford the cost of the loan, congratulations! You’ve just found the perfect used car – despite your bad credit score!
Got Bad Credit In Canada? Need A Great Used Car? Shop At Ride Time Now!
Ride Time is the #1 used car dealership for Canadians with bad credit. We specialize in providing reliable, affordable cars to anyone who needs transportation – no matter how good or bad their credit scores may be.
Even if your credit score is low, we can guarantee that our network of 15+ specialized lenders will be able to give you a reasonable deal on your auto loan. All you need is proof of 3 months of employment, take-home pay of $1,500/month before deductions, and a valid Canadian driver’s licence. It’s just that simple.
All of our used cars are in spectacular condition, and we have a wide variety of choices, so you’re sure to find a car that’s right for you.
So browse the Ride Time vehicle gallery today. Even if you’re not in Winnipeg, we can approve you for credit online, and deliver your vehicle to you anywhere in Canada.