How to Get a Car Loan as a Newcomer in Canada

As a newcomer, buying a car in Canada is one of the biggest financial decisions you will make. If you’ve decided to get a car and need to finance it, there are many options that you should know about.

When you’re new to Canada, owning a vehicle can help make life easier and more convenient. Many car buyers rely on auto loans to pay for their vehicles. Before heading to your dealership or bank, here’s what you’ll need to know to help you get approved for a car loan as a newcomer in Canada.

What documents will I need?

The first thing you need to do before applying for a car loan is to have your required documents in order. Here’s what most lenders and dealerships will ask for during your car loan application:

A driver’s license: You will need a government-issued driver’s license in the province you live in to take out a car loan. Your driver’s license proves your identity and will show that you are over the age of 18 or 19 (the minimum age to take out a car loan, depending on your province’s laws) and that you are legally allowed to drive.

• Check with the government of your province or territory for details.

• Most provinces have three types of licenses: learner’s permit, intermediate license and full license. While it’s possible to get approved for a loan with a learner’s permit, you will not be able to insure a car in your name until you have obtained an intermediate license. That being said, it’s a better idea to get your full license first before buying a car, as your insurance rates may be lower.

Proof of residence: To prove that you currently reside in Canada, you can show your lender a recent bill or statement sent to your address. Utility bills, bank statements, lease agreements, government-issued IDs, tax documents, and insurance policies would all be accepted — you’ll only need to show one. 

Proof of income: Have pay stubs or bank statements ready to show your lender if they ask. You may also need to provide proof of employment, showing your income, title or position and work arrangement details. While different lenders will have different requirements, according to Loans Canada, the minimum income typically accepted for a car loan is between $1,200 and $1,800 per month.

Should I expect a credit check?

One of the main things lenders look at is your credit history. Your credit history is a record of your ability to repay debts (credit card bills, loans, etc.). Usually, this is summed up in your credit score, which is a three-digit number that gives lenders a quick overview of the amount of debt you have and the length of your credit history.

The higher the number, the more regular you are at paying your debts and the more likely you may be approved for a loan. Typically, the scoring system works like this:

• 350-650: Below average

• 650-725: Good

• 725-760: Very Good

• 760-900: Excellent

Most dealerships will have a minimum credit score requirement to secure a loan, but meeting that requirement doesn’t guarantee your loan gets approved.

RBC Online Banking clients can check their credit rating through their accounts without affecting their credit score.

Is it possible for Newcomers to get a loan without a credit history?

Yes! While different lenders have different requirements for permanent residents, many newcomers to Canada don’t have a credit history (or a short one). However, that may not prevent you from securing a loan. Check with your lender to see if there are any special programs to help newcomer car buyers.

For example, permanent residents and temporary foreign workers who have been in Canada for less than three years may be able to provide a downpayment (money paid upfront towards the cost of the car) to secure a loan.

Where do I go to get a loan?

In Canada, you typically apply for a car loan at the auto dealership. Once you know the vehicle you want and have negotiated a price, you can ask your dealer to apply for a loan with your preferred lender. Some dealers may even offer special financing options, such as no interest on your loan for a specific period. This is typically reserved for the newest models, and a great credit score is usually required.

RBC’s Car Loan Payment Calculator can give you an idea of how loan payment terms can affect you loan payment amount.

Getting the best deal

Once you’re ready to start negotiating your auto loan, the most important number to consider when evaluating your offers is usually the interest rate. Interest is the fee you pay your lender on top of the loan to borrow money from them. It’s shown as a percentage of the principal loan, meaning the lower the number, the more you save.

It’s a good idea to have an understanding of interest rates offered by multiple lenders to evaluate your options and get the best deal. Also don’t forget, you can always ask for the lender you prefer to get your auto loan with.

Newcomers may be eligible for an RBC car loan even if you have no Canadian credit history.* Check out RBC’s Car Loans for Newcomers to Canada hub for automotive financing specifically tailored for newcomers to Canada.

* Available to permanent residents and temporary foreign workers who have been in Canada for less than 3 years. Down payment of up to 15% may be required. Maximum financing term is 96 months with a maximum loan amount of $75,000. Note: for investor class permanent residents, there is no maximum loan amount. No credit history required on vehicles less than 10 years old, provided you meet all of the eligibility and credit criteria of Royal Bank of Canada.

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