How to Buy a New Car For Your Business in Canada
How to Buy a New Car For Your Business in Canada
Posted on August 1, 2022
Running a business in Canada takes perseverance and true grit, especially when it comes to trying to secure financing for a new vehicle.
Whether you are buying an EV, hybrid, or conventional internal combustion engine, these suggestions from our Halton car loans team are going to help make your life easier.
What is your business structure?
The first thing we need to look at is your business structure. Are you a sole-proprietorship, partnership, or incorporated?
Your business structure impacts the way that prospective auto loan providers underwrite your loan.
Most of our readers and business owners in general in Canada are sole proprietors, so for the rest of this conversation, we will work on how to get a car loan for your business as a sole proprietor.
Having enough verifiable income to service the car loan
Lenders will need to know how much income they are receiving on a monthly basis; this amount is used to determine what is the maximum car loan you can handle based on industry best practices.
Right now, the maximum debt-to-income ratio a person is able to have on a car loan is forty percent.
If your business is generating pre-tax income of $10,000 per month, then the maximum amount of debt you can service, including any new car loans, would be $4,000.
This is a simplified calculation, but you can understand the implications.
Prospective lenders will need to see proof of income; when a borrower is working a traditional job, they just show their payslip, but as a business owner, it takes considerably more documentation.
You will need to supply your income tax notice of assessments; the income declared on your income tax assessment is considered your real income.
Given the current economic uncertainty being felt throughout the country, you will also need to provide copies of your bank account statements for the last 6-12 months.
This will give the prospective lender all of the income verification they need.
Credit score needed for a self-employed car loan
This is a loaded question; no lender will post the precise credit score they require to approve a car loan. In Canada, the median credit score is in the 660-range, depending on which credit reporting agency you are referencing.
If your credit score is over 660, then you will have no obstacles to accessing a competitively priced car loan. So long as your credit score is at least 600, you can get approved without much hassle.
Where to secure the best self-employed car loans
The best place for self-employed car loans is not available online; you need to go through a local car dealership in your area, a dealership that has assisted other entrepreneurs in your area get approved for a car loan.
These local dealerships are able to access the most preferential interest rates and can pass those savings on to you.
The dealership can also help you find the perfect car; you can test drive its entire inventory until you have found the car you love the most.
Now that you know how to get a self-employed car loan in Canada, head on down to your local dealership today.
We will use all our skill and experience to deliver the lowest possible Halton auto loan rates, guaranteed. Contact Car Nation Canada Direct to learn how we can help.