In today’s hire-and-fire economy, plenty of drivers are finding it hard to keep up with their auto financing schedules. Plenty of jobs were lost forever during the pandemic, or maybe wages aren’t keeping up with the cost of living. With throttled supply chains still pumping up retail prices in Canada, inflation reached its highest point (8.1%) in almost four decades by mid-2020, according to Statistics Canada. The main culprit was gasoline, with pump prices almost 55% higher than they were a year ago. Reflecting the run-up to this situation, drivers have been battling to repay their car loans for many months. In fact, Equifax Canada reported a 14.7% surge in non-bank auto delinquencies in the final quarter of 2021, compared to the same period the previous year.
Is Refinancing My Car Loan a Smart Step?
Many lenders and dealerships – like Laneway Auto Loans and Sales – are happy to discuss ways of restructuring vehicle financing. One of the easiest ways is by extending the term of your loan. Under Canadian law, car loan terms can be stretched out to 84 months. Although such nine-year terms cost more overall, monthly repayments can drop considerably, compared to the usual auto financing terms of 36 to 72 months.
How Does Auto Loan Refinancing Work in Canada?
Basically, refinancing an auto loan is just like repurchasing your vehicle. But you’re already the owner, so there’s no price negotiation, and both you and the lender already know exactly what you need to pay: your car loan balance. When you apply to refinance your car, the lender – often a reputable dealership like Laneway Auto Loans and Sales – assesses its eligibility for financing (particularly age and condition), and also checks your credit score. If you’ve been keeping up your payments regularly, your credit score will have improved too. Once your application is approved, the lender pays off your current loan in full, while also issuing a new agreement covering the new amount you owe. The amounts may differ, depending on terms, interest rates, fees and insurance.
How Do I Refinance My Car Loan in the Maritimes?
All reputable lenders work with basically the same criteria, although some (like Laneway Auto Loans) may offer greater flexibility than others. In general, here’s what you’ll need:
- a registered domicile where you receive mail (preferably with utility bills in your name);
- at least one source of income with documentary evidence (payslips, tax returns etc.);
- a credit score (usually over 660 and rarely below 500) and clean credit history;
- enough financial wiggle room in your debt-to-service ratio to handle monthly repayments.
Bonus: With a carefully chosen auto financing deal, you may be able to leverage some cashback as well (but always make sure you’re getting better terms and/or a lower interest rate than your previous loan).
