How to Get Your First Auto Loan

Learning how credit works will allow you to drive off the dealership lot with your first vehicle and your finances intact


Buying your first set of wheels is an exciting experience.

When shopping for your first vehicle, you might spend days exploring different makes, models, dealerships, and even the colour of your potential vehicle.
The cost of a new vehicle or even a used one, for that matter, can make you want to ride a bike everywhere. This is especially true when you're a student or a fresh graduate, and there's only so much you can spend.

Also, lenders may give you a hard time if your credit score is still a work in progress. They want to see that you've previously borrowed money and can pay it back on time. However, this doesn't mean that it's over for you.

If you're wondering how to get an auto loan with no credit in Canada, you’ve come to the right place...

1. Save for a Down Payment


A down payment is a percentage of the buying price paid upfront. While a down payment is not typically required for an auto loan, making one is usually a good idea.
With a down payment, you won't have to borrow as much, and your monthly payment will be lower.

A bigger down payment will indicate that you're financially prepared to take on a loan. It usually gets you more favorable loan terms, which will save you money in the long run. A good idea is to start saving early. Not sure what is an acceptable amount? We’ll work with you to help figure it out.

2. Estimate What You'd Ideally Like To Spend Per Month

Know how much vehicle you can comfortably afford before you start shopping the premium section. Take a good look at your finances – income, savings and debts. This should give you a ballpark figure of what you can afford to spend every month on vehicle payments.

Your budget doesn't have to be exact, but it will help if you can come up with a realistic range to work with. Loan terms vary, so see tip #5 for more information on getting pre-approved.

3. Build Your Credit Score

Now that you know what monthly payments would look like, it's time to build your credit.

Here's something you probably didn't know about auto loans. Unlike a credit card or mortgage, you can secure an auto loan even if you have pretty bad credit, just be ready to pay more.

If there's ever a time to work on your credit score, it's before you get an auto loan. Your credit score will be used to determine the interest rate you'll pay on a loan.
Credit scores in Canada range from 300-900 points. A high credit score (660+) may help get you a more favorable interest rate, which in turn will affect your overall car-buying budget.

If you haven't checked your credit score in a while, you can call us at 204-623-4350 (The Pas) or 204-687-3940 (Flin Flon) and we can pull a copy of your credit report and go over it with you.

To improve your credit score continues to pay all your bills (rent, utilities, phone, internet) on time and in full, and pay down your debt when possible.

4. Get a Co-applicant

Since you lack a credit history, you can have trouble arranging vehicle financing. Lenders may feel more confident about giving you a loan if you find someone who is already a creditworthy borrower, such as a family member or a trusted friend, to co-applicant your loan. Your co-signer/guarantor should be ready to take on the full responsibility of the vehicle loan if you default on your payments.


5. Get Pre-Approved

Most people make the mistake of picking a vehicle then try to figure out the financing. If you don't have much of a history with credit, it's advisable to first go through the pre-approval financing.

This process will determine what type of loan (and therefore vehicle) you can get. Pre-approval can help you negotiate a better rate as you have already overcome the finance approval hurdle.