Getting financing for a car when you have no credit history is often presented as an impossible to many first-time auto buyers. In fact, many people with short credit histories end up wondering how they're ever supposed to get the credit history that these companies want if they can't get a loan. If you need a car to get to a job in the Toronto area, this can be especially frustrating.
Fortunately, it is possible for someone with little or no credit history to get instant approval for an auto loan, but you have to know where to look and what to expect. While you might not get the best deal available, you can get a good car at a reasonable monthly payment. Furthermore, as soon as you get an auto loan, you'll be able to start building your credit history. If you can make full, on-time monthly payments, you'll soon be able to qualify for the best rates on a variety of loans and other deals.
Start your search by looking for a loan that is geared towards people with little to no credit history. Many banks and credit unions have these types of loan programs in place to assist recent graduates. Be prepared, however, to accept additional criteria that people with longer credit histories don't have to meet.
Be prepared to make a down payment. Putting some money down (usually ten percent of the total purchase price or less) shows the lender that you have a financial stake in the car. That reduces the odds that you'll default on payments and have to have the car repossessed. Making a down payment also shows that you are responsible enough to save some money. In many cases, the ability to make a down payment will knock off a few points from your interest rate. It will certainly make it possible to get a lower monthly payment.
You may also discover that you will have to agree to find a co-signer or sign up for automatic payments. These two steps help a lender ensure that it will receive your payment. Again, you may get a lower interest rate by agreeing to these terms.
Finally, expect to have to show proof of income. Your lender will need some kind of assurance that you have the funds to make the monthly payment.