Buying a Car During a Recession: How You Can Still Get Approved

Buying a Car During a Recession: How You Can Still Get Approved

Posted on January 31, 2023

While this may sound counterintuitive, buying a car before a recession is a strategy that can help you save money over the long term while still getting the car you need today.

Lenders and carmakers are all trying to generate sales with inflation nearing record highs; it is just a matter of time before the Bank of Canada is forced to raise interest rates to the level where it causes a recession.

Once a recession sets in, lenders become more conservative and charge higher interest rates, so you should move fast and lock in the savings before it is too late.

Important Credit Consideration

While having a good credit score is important and can help you save money whenever you need credit, it should not hold you back from getting a car loan.

However, if your credit score is weak and you put off buying a car until your score is much higher, the opportunity cost may end up costing you more in the long run.

The interest rate you qualify for today with weak credit may be more competitive than what you would pay if you applied with a higher credit score six months from now.

As a good financial health practice, you should sign up with both credit agencies (TransUnion & Equifax), so you can stay on top of your credit score; this way, you always know where you stand.

Budgeting With a Financial Buffer

One of the best things you can do, whether we are in a recession or not, is to create a budget where you have a buffer in case there is a financial shock. If you'd like to learn more about budgeting for a new car, click here.

Covid has taught us that our economy is fragile, and it doesn’t take much to bring things to a screeching halt.

If your budget is maxed out and you don’t have room for unexpected expenses, you could be forced to dig yourself further into debt.

If you are not bringing in enough money to create this buffer, you might consider taking on a second part-time job which can help augment your income, so you have money left over at the end of the month.

The Best Way to Buy a Car Before a Recession

The best source of competitive car loans is through a local car dealership.

These dealerships have access to loans that no one else can access; these dealerships can get you approved for a car loan even if you were turned down before.

The dealership is equipped with the resources to show you what steps you need to take if you want to boost your credit score.

While no one wants to admit it, the recession is going to come, so contact the dealership in your community today and get things rolling; it will be the best decision you made this month, if not this year.

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