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Applying for a Car Loan in Canada

Applying for a Car Loan in Canada

Buying a new or used car is an exciting experience. You get to test drive different models, pick the perfect color and take home a shiny vehicle. But for many shoppers, the financing process is the least enjoyable part. Getting approved for a car loan can seem intimidating and confusing, especially if you have little experience with loans or credit. Will your application get accepted? How much can you afford in monthly payments? What interest rate will you qualify for?

The good news is that with the right preparation and knowledge, the loan application process doesn’t have to be so mystifying. This comprehensive, step-by-step guide will walk you through everything you need to know to get approved for affordable auto financing in Canada. Whether you have stellar credit or are rebuilding your score, we’ve got you covered. With tips for picking the right lender, calculating your budget, gathering documents and more, you’ll feel confident every step of the way.

Follow this roadmap and you’ll be driving off the lot with keys in hand before you know it. Let’s get you on the road to financing success!

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Know Your Credit Score

The very first thing you should do when applying for auto financing is check your credit score. This three-digit number gives lenders insight into your creditworthiness and can directly impact the loan terms and interest rates you qualify for.

Generally, the higher your credit score, the better. Lenders view applicants with good credit scores as less risky to lend to, which means you’re more likely to get approved and qualify for lower interest rates. On the other hand, poor credit scores indicate higher risk, which can lead to loan denial or less favorable rates and terms.

In Canada, there are two main credit bureaus that provide credit reports and scores – Equifax and TransUnion. You can easily obtain your score from either bureau online or through their mobile apps. Checking your score ahead of time is key, as this gives you a chance to improve it if needed before submitting a loan application.

If your credit score is low, all hope is not lost. Here are some tips to boost your score in the months leading up to your auto loan application:


  • Pay all bills on time – payment history is a major factor
  • Pay down revolving debt like credit cards and lines of credit
  • Avoid applying for new credit
  • Check credit reports for errors and dispute inaccurate information
  • Become an authorized user on someone else’s credit card (with good standing)


With some time and effort, it’s possible to increase your credit score substantially. Aim for at least 650 or higher when applying for the best approval odds and rates.


Determine Your Budget

Before even starting the process of applying for a car loan, it’s crucial to determine your overall budget for the vehicle purchase. This involves calculating the total cost of the car, including the purchase price, taxes, fees, insurance, gas, maintenance and any extras. Adding up these expenses will give you a realistic picture of what you can afford both upfront and on a monthly basis.

First, research the make and model you want to buy and get price quotes from several dealers. Next, factor in taxes which can add several thousand dollars to the sticker price. In most provinces, you’ll pay provincial sales tax on the full vehicle price. There are also additional regulatory and documentation fees to budget for, which can range from $100-$500.

Insurance is required to legally drive and finance a car. Get quotes from providers based on the vehicle you want to insure. Account for comprehensive and collision coverage, not just basic liability. Gas, maintenance, parking costs and any extras like winter tires should also be estimated and included in your total budget.

Once you have a total all-in budget, determine the maximum amount you need to finance. Focus on a loan payment you can comfortably afford each month. As a general rule, total monthly vehicle expenses including the loan payment should be less than 10-15% of your take home income. Sticking to this budget from the start will ensure you get a car loan you can repay responsibly.


Get Pre-Approved

Getting pre-approved for an auto loan before visiting dealerships can make the financing process much smoother. Pre-approval involves applying directly to a lender for a car loan before you start shopping. The lender will assess your credit and finances and provide a preliminary loan approval, subject to finding a suitable vehicle.

There are several key benefits to securing a pre-approval:


  • Know your budget – Pre-approval lets you know the maximum loan amount you qualify for based on your credit, income and debts. This helps narrow your search to vehicles within your price range.
  • Lock in an interest rate – Many lenders will guarantee the rate they pre-approve you for, protecting you if rates rise while you shop.
  • Strengthens negotiating power – Showing sellers you are pre-approved signals you are a serious buyer and can help you negotiate the best possible deal.
  • Speeds up the process – With pre-approval paperwork ready, financing at the dealership takes minutes rather than hours.


To get the best pre-approval rates, shop around with banks, credit unions and online lenders and compare their offers. Having a co-signer with good credit or putting down a larger down payment can also help secure more favorable loan terms.

Most pre-approvals are valid for 30-90 days. If you find your new vehicle within this timeframe, the pre-approval should still stand. Otherwise, you may need to reapply if too much time has passed.


Pick the Right Lender

Not all auto lenders in Canada are created equal. Do your research to find the best loan terms and interest rates for your situation. Here’s an overview of the major types of car loan lenders in Canada and what they offer:



The big Canadian banks like RBC, TD, Scotiabank, BMO, CIBC and National Bank offer competitive interest rates and flexible terms on car loans. As full-service banks, they provide convenience but rates may be higher than specialized lenders. Banks promote financing right at the dealership to make the car buying process smoother.


Credit Unions

Local credit unions can provide relationship-based lending and excellent customer service. Interest rates may be lower than banks. Terms are flexible but maximum durations may be shorter. Credit unions are ideal for borrowers looking for a personalized touch.


Captive Finance Companies

Many automakers have their own finance companies like Ford Credit, Toyota Financial Services or Honda Financial Services. They offer promotional financing on select models. Rates can be lower but you’re limited to their vehicle brands. May require higher down payments.


Online Lenders

Online-only lenders like Canada Drives allow you to pre-qualify and apply entirely online. Offer loans to those with bad credit or no credit history. Have flexible terms and approval is fast. May have higher interest rates to offset risk.


Newcomer Programs

Most major banks and some credit unions offer special car loan programs for newcomers to Canada with options like no credit history required, no down payment, and preferred rates. Excellent option for permanent residents or foreign workers from other countries.

Review all the options to find the best lender for your specific auto financing needs. Ask about rates, terms, fees, discounts and pre-approval options. Being strategic about your lender choice can help ensure affordable payments that fit your budget.


Gather the Required Documents

To get approved for a car loan, lenders require proof of ID, income, residence and car insurance. Having these documents ready ahead of time will make the application process quicker. Double check you have everything needed before applying.

Here are the typical documents you’ll need:


  • Proof of identity – Driver’s license, passport, etc.
  • Proof of income – Recent pay stubs, T4, notice of assessment
  • Proof of address – Utility bill, bank statement, rental agreement
  • Proof of auto insurance
  • Down payment funds – Bank statement showing savings


For newcomers to Canada without an established credit history, providing additional documentation upfront can help demonstrate creditworthiness:


  • Letter of employment confirming income
  • Bank statements showing savings
  • References from financial institutions in your home country
  • Phone and utility bills to verify address history


Having these supplementary documents ready before you apply for a car loan will make the approval process faster and easier.


Apply In-Person at the Dealership

Many shoppers get financing at the dealership through special manufacturer incentives not available elsewhere. Tell the financing manager you’re interested in applying for dealer financing. They will submit your application to lenders and get back to you quickly regarding approval.

Here are some tips for getting the best dealer financing offer:


  • Negotiate the purchase price first before discussing financing. This will give you more leverage to get the best rate.
  • Ask the dealer to submit your application to multiple lenders to get multiple offers.
  • Compare the interest rates and terms side-by-side.
  • Let the dealer know you are comparing offers and see if they can beat the rate.
  • Opt for shorter loan terms (3-5 years) to get lower interest rates.
  • Put down a larger down payment if possible to reduce the amount financed.
  • Check manufacturer financing offers which are sometimes 0% interest.
  • Time your purchase right to get special financing promotions.
  • Having good credit can qualify you for the best advertised rates.
  • Agree to dealer financing as a negotiation tactic, but still shop around after.


By leveraging multiple dealer financing offers and negotiating, you can potentially save hundreds or thousands of dollars in interest over the loan term. Don’t be afraid to negotiate!


Meet the Minimum Requirements

While every lender has their own approval criteria, most have minimum requirements for income, credit score, down payment percentage and more. Aim to meet these thresholds to increase approval odds no matter your credit situation.

A typical minimum credit score requirement is around 650-700 for most mainstream lenders. Specialty lenders that offer bad credit auto loans may approve borrowers with scores as low as 500. The higher your credit score, the better the loan terms will be.

For income, expect a minimum monthly income requirement around $1,500-2,000. This ensures you have enough steady income to afford the monthly payments. Some lenders may require you to have been employed at your job for a minimum period as well.

Minimum down payment requirements are usually between 0-20%. You’ll get the best rates and terms if you can put down 20%, but $0 down options are available too. Putting more money down also means you have to finance less, which helps approval odds.

While those are typical thresholds, it’s important to note that each lender sets their own criteria. Checking with multiple lenders is key, because you may meet requirements with one that you don’t with another. Do your research to find a lender whose minimum requirements align with your financial situation.


Tips for Approval Success

Beyond meeting the basic requirements, there are a few things you can do to boost your chances of getting approved, especially if you have bad credit or other risk factors.


Add a Cosigner

Adding a cosigner with good credit to your auto loan application can offset negative factors like low income, short credit history or past issues. The cosigner agrees to be equally responsible for repaying the loan, so the lender has an additional person to seek payment from if you default.


Put More Money Down

A higher down payment shows the lender you’re financially committed to the vehicle purchase. Putting 20% or more down also lowers the amount financed, which reduces risk for the lender. For bad credit applicants, a down payment of at least 10% is recommended.


Minimize Hard Credit Checks

Each time a lender does a hard inquiry into your credit when you apply, it can negatively impact your score. Minimize hits by getting pre-approved first and then only completing one application at the dealership. Too many hard checks can raise flags.


Improve Your Credit

If possible, take the time to improve your credit score before applying for an auto loan. Paying down balances, resolving errors and practicing good credit habits can boost your rating. The higher your score, the better your chances of approval.


Provide Additional Documentation

Supplementing the standard income and identity documents with things like recent paystubs, bank statements, tax returns and letters of employment explanation can help demonstrate your ability to repay the loan.


Financing Options for Buying a Car in Canada

When purchasing a new or used vehicle in Canada, you essentially have two main financing options – buy with cash or finance through a loan. There are pros and cons to each approach. Let’s compare the key differences between paying cash versus taking out auto financing:


Cash Purchase

Paying the full purchase price in cash means no monthly car payments or interest charges. You own the vehicle outright. The main advantages of a cash purchase include:


  • No loan approval process
  • Avoid paying interest fees over the loan term
  • No risk of repossession if payments are missed
  • May be able to negotiate a lower price


The downsides are:


  • Need to have the large lump sum amount on hand
  • Ties up cash that could be invested elsewhere
  • May need to deplete your savings


Car Loan Financing

With auto financing, you only need to put down a portion of the vehicle price and can pay off the remainder in monthly installments over several years. Advantages include:


  • Allows you to buy a more expensive vehicle
  • Spreads costs out over time
  • Build credit history by making payments
  • Lower initial outlay with down payment


Drawbacks of financing are:


  • Need to be approved based on credit, income, etc.
  • Pay more overall with interest fees
  • Loan terms create obligation to make payments
  • Risk of repossession if unable to make payments


Weighing the pros and cons of each option will help you decide if cash or financing is the better choice when buying a car.


Interest Rates

Interest rates have a big impact on your overall auto loan costs. Understanding how rates are determined and getting the lowest rate possible for your situation can save you thousands over the life of the loan.

Lenders generally consider the following factors when setting interest rates for car loans in Canada:


  • Credit score – Borrowers with higher credit scores qualify for lower rates
  • Down payment amount – Larger down payments reduce risk for the lender and lead to better rates
  • Loan term – Shorter loan terms often have lower interest rates
  • Type of vehicle – New cars get better rates than used vehicles
  • Market competition – Rates fluctuate based on broader economic conditions


The average interest rate on new car loans is around 4-7%, while used car loans average 6-9%. Rates for bad credit borrowers tend to start around 9% and go up from there depending on credit profile.

Here are some tips to get the lowest interest rate possible on your auto loan:


  • Shop around with multiple lenders to compare rates
  • Ask about promotions or special rate offers
  • Improve your credit score before applying
  • Put down a larger down payment if possible
  • Opt for a shorter loan term
  • Consider a co-signer with better credit
  • Look for lenders that specialize in bad credit


Paying attention to interest rates, shopping around, and taking steps to improve your rate can result in significant savings over the life of your car loan.


Down Payment

The down payment is the portion of the vehicle’s purchase price that you pay upfront when financing. It reduces the amount you have to borrow and can impact the loan terms you qualify for.

Most lenders recommend a 20% down payment on a new vehicle and a 10% down payment on a used vehicle. The higher your down payment, the lower your monthly payments will be since you’re borrowing less. A larger down payment also shows the lender you’re financially committed.

However, some lenders offer low or no down payment options. Here are some tips for minimizing your down payment:


  • Ask the dealer about manufacturer incentives that allow $0 down.
  • Consider a longer loan term like 72-84 months to lower monthly costs.
  • Explore lenders that work with bad credit and offer alternative down payment options.
  • Put down at least taxes and fees (around 5% of the vehicle price) if you can’t afford 20%.
  • Add a cosigner with good credit to help qualify for better terms.


The down payment does impact your monthly payments. With a $0 down loan, your monthly cost will be higher because you’re borrowing the entire amount. But even a small down payment of a few thousand dollars can make payments more affordable.

Work within your budget, but know that the more you put down upfront, the less you’ll pay each month over the loan term.


Loan Term

When applying for a car loan in Canada, you’ll need to decide on the length of the loan term, also known as the amortization period. This is the amount of time you’ll have to repay the loan amount plus interest. Typical car loan terms range from 24 to 84 months, or 2 to 7 years.

The longer the loan term, the lower your monthly payments will be. However, you’ll end up paying more interest costs over the full repayment period with a longer term. For example, a $20,000 loan at 5% interest would cost approximately $2,300 in interest over 24 months, but $5,200 in interest over 60 months.

Shorter terms like 2-3 years are best if you want to save on interest and pay off the loan quickly. They require higher monthly payments though. Longer terms of 5-6 years make sense if you need lower payments to fit the car within your budget. Just be aware you’ll pay significantly more interest over the full loan.

Many experts recommend not exceeding a 5 year term, even if a 6 or 7 year loan provides lower payments. The longer the term, the more likely you are to end up “upside down” on the loan, owing more than the car is worth, which can be problematic if you want to sell or trade in your vehicle before the loan is paid off.

Discuss your budget and financial goals with your lender to choose the right loan term for your situation when financing a car purchase in Canada.



Many lenders require a co-signer if you have poor credit or limited credit history. A co-signer is someone who agrees to be responsible for repaying the loan if you are unable to make the payments yourself. Here’s what you need to know about co-signers:

Lenders typically require a co-signer if your credit score is below 600 or you haven’t had any loans or credit cards for at least 3 years. The co-signer you choose should have an excellent credit score (720+) and a solid income. Immediate family members like parents or spouses often make good co-signers.

By co-signing a loan, the co-signer takes on equal responsibility for making monthly payments. If you miss payments, it will negatively impact both your credit and the co-signer’s. The lender can pursue the co-signer for the remaining balance if you default. So being a co-signer is a big responsibility that shouldn’t be taken lightly.

If you don’t have a family member or friend willing and qualified to co-sign, some alternatives are to boost your credit score, increase your down payment, provide proof of sufficient income or apply with a lender that offers loans without co-signers. You may pay a higher interest rate but won’t need a co-signer. Explore all your options if getting a co-signer isn’t feasible.



Once your car loan is approved and you drive off the lot in your new vehicle, it’s important to understand the monthly repayment process and avoid any penalties for missed payments.

Most lenders will set up an automatic payment schedule where your monthly loan payment is automatically withdrawn from your bank account on a set date each month. This pre-authorized payment option ensures you never miss a payment. Just make sure the account your payments are drawn from always has sufficient funds available on your payment date. If the automatic payment ever bounces due to insufficient funds, you may be charged an NSF fee by your lender.

If you prefer not to have automatic payments set up, you can manually make your monthly loan payment instead. Just be extremely diligent about paying on time each month. Even being a single day late on your car loan payment can result in hefty late fees. Most lenders will charge at least $30 for a late payment, but this amount can be higher. Being over 30 days late will likely incur an even bigger penalty and negatively impact your credit score.

To avoid any penalties, carefully review your loan agreement to confirm your monthly due date and required payment amount. Mark your calendar with reminders to ensure your payment is made on time, whether automatically or manually. Setting up alerts through your lender’s website is also a good idea. Stay on top of your monthly repayment schedule and you can avoid fees while paying off your auto loan smoothly and successfully.



Getting approved for car financing can seem daunting, but breaking it down into clear steps makes the process much more manageable. By following this guide, you now know the key things to do before applying, like checking your credit score, determining your budget, and getting pre-approved.

You also learned important tips for the application itself, such as having all required documents ready, meeting lender requirements, and implementing strategies to boost your approval odds. While every situation is unique, this comprehensive walkthrough equips you with the knowledge needed to set yourself up for success.

For additional resources as you navigate the auto financing process, be sure to check out the following:


  • Financial Consumer Agency of Canada – Offers information on your rights and responsibilities when financing a car.
  • Canada Drives – An online portal to easily compare different lenders and apply for pre-approval.
  • – Research vehicles and connect with local dealerships.


We hope this guide gave you the clarity and confidence to move forward in your car buying journey. Wishing you all the best as you get on the road to driving your new vehicle!

Ready to start your application? Search for dealerships in your area and inquire about financing options today.

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Questions About Applying for a Car Loan in Canada


To apply for a car loan in Canada, you have a few options. The easiest way is to get pre-approved financing at your bank or credit union before visiting a dealership. This allows you to know how much you’re approved to borrow ahead of time. You can also apply for financing directly through the dealership, who will submit loan applications to potential lenders on your behalf. Approval time varies, but can be immediate or take up to 48 hours in some cases.


Once approved, you’ll sign paperwork and can take delivery of your new vehicle right away. The basic eligibility criteria for a car loan typically includes being a Canadian citizen or permanent resident, having a valid Canadian driver’s license, being over the age of majority in your province, and having sufficient income to make the loan payments.

While there is no universal minimum credit score, most lenders prefer scores of 650 or higher when approving car loans. The higher your score, the better your chances of getting approved and securing favorable interest rates and terms. Anything under 650 is generally considered subprime and will mean higher interest rates if approved.


With good credit (scores above 700), you’ll likely qualify for a prime rate loan with low interest rates. Fair credit scores between 600-669 may still qualify, but with higher rates. Poor credit scores below 600 will have difficulty getting approved without a cosigner. Checking your credit score in advance allows you to assess your changes or take steps to improve it first if needed.

Typical documents required for a car loan approval include:


– Proof of identity – driver’s license or other government-issued ID


– Proof of income – recent pay stubs, T4s, notice of assessments


– Proof of address – utility bill, bank statement, rental agreement


– Down payment


– Cost estimate and vehicle details


– Proof of auto insurance


Having these documents ready when you apply for a car loan can help accelerate the approval process. Income and credit history verification are key factors determining your interest rate and loan amount.

Yes, new immigrants and foreign workers can qualify for car loans in Canada. The requirements are similar to residents. You’ll need:


– Permanent residency card or valid work permit


– Proof of a Canadian address


– Canadian bank account and financial history


– Full time employment or other income


Some lenders offer newcomer car loan programs catering to new immigrants with easier approval and preferential rates. Foreign students studying in Canada can also qualify with a good credit cosigner.


Unlike mortgages, car loans don’t necessarily require a 20% down payment. Many lenders now offer 0% down or low down payment auto financing options. That said, the more you put down, the lower your monthly payments and interest costs will be.


For new cars, lenders usually want 10-20% down. For used cars which depreciate faster, you may need at least 20% down to get approved. Buyers with excellent credit can sometimes still get approved for $0 down car loans. Always compare rates and terms across multiple lenders.

Yes, getting pre-approved for car loan financing before visiting dealerships has several advantages:


– Know your budget and maximum loan amount in advance


– Strengthen your negotiating position on the car price


– Avoid pressure tactics to add extras you may not need


– Fast track the loan application process with the dealer


Pre-approvals are quick and don’t affect your credit score. You can easily compare loan rates from banks, credit unions, and other specialized auto lenders as well. Just make sure it’s still valid when you find the car you want.


Typical car loan terms in Canada range from 12 months up to 8 years (96 months). Longer terms of 6-8 years have become more common even for new cars, allowing lower monthly payments but at the cost of higher interest paid over the life of the loan.


– 12-36 months – best for used cars and keeping payments affordable


– 48-60 months – most common term length for new cars


– 72-84 months – increasingly popular to get lower payments


– 96 months – rare unless you have excellent credit and high income


A good rule of thumb is to match the loan term length to how long you expect to own the car. Interest rates are also usually lowest for terms under 60 months.

All have their pros and cons. Bank car loans generally offer the lowest interest rates to prime borrowers but can be less flexible. Dealer financing tends to be faster and more convenient but usually costs more overall. Third-party lenders provide specialized bad credit auto loans but charge higher interest rates.


Wherever you apply, comparing all your financing options side by side is highly recommended. Consider both rates and loan terms when deciding where to get the best auto loan. Getting multiple pre-approvals also strengthens your negotiating position with the dealer.

When reviewing car loan terms, watch out for these common fees that can raise your overall costs:


– Origination fees – upfront fee to process the loan, usually 1% of loan amount


– Documentation fees – admin costs for preparing loan contracts


– Prepayment penalties – extra fees if you pay off loan early


– Default insurance premiums – added costs for lenders to cover risk


There can also be hidden costs with extended warranties, service contracts, or overpriced extras bundled with dealer financing. Read all paperwork carefully and negotiate to remove unnecessary fees.

The lowest auto loan rates go to borrowers with excellent credit, moderate loan amounts, and shorter repayment terms. Rates under 5% are only advertised but usually require credit scores over 700 to qualify. Those with good credit can expect rates around 5-7%.


Here are some tips to get the lowest rate possible:


– Shop and compare rates from at least 3 lenders


– Opt for a shorter loan term length (under 5 years ideal)


– Put down a larger down payment of at least 20%


– Choose a fuel efficient, gently used model that holds value


– Enroll in auto-debit payments from your bank account

If you have bad credit, limited credit history, or a past bankruptcy, getting approved for an auto loan at affordable rates is still possible but challenging. Some options to explore include:


– Applying with a cosigner who has good credit


– Considering a secured car loan using collateral


– Looking at in-house dealer financing which can be more flexible


– Exploring lenders specializing in second chance auto loans


While interest rates with poor credit are often over 10%, taking steps to improve your credit first before applying for a car loan is recommended whenever possible. An alternative is buying an inexpensive used car with cash upfront.

As of January 2024, current average interest rates for new car loans in Canada are between 5-7% for prime borrowers with good credit, and 8-12% for near-prime applicants. Used car loan rates are typically 1-3% higher overall compared to new vehicle financing.


Many factors determine individual auto loan rates beyond the current prime rate, including your credit score, income level, loan amount, payment history and even geographic location. Getting multiple rate quotes tailored to your situation is the best way to identify the current market rates you qualify for.

As a general rule, your car payment including taxes and insurance should not exceed 10-15% of your monthly take home income. Here is how to calculate your affordable budget:


  1. Determine your monthly net income after taxes/deductions


  1. Multiply by 0.15 (15%) to get your maximum monthly vehicle budget


  1. Subtract estimated monthly fuel, insurance, maintenance costs


  1. The remainder can safely go towards your loan principal/interest payment


Online auto loan calculators make it easy to see loan payments at different amounts, rates and terms as you adjust to your personalized budget. Being pre-approved at your ceiling amount gives you flexibility to negotiate the best deal while staying within your means.

If your desired car is stretching your budget, here are some options to lower the loan payments:


– Increase your down payment amount

– Choose a less expensive vehicle

– Opt for a longer loan term (but watch out for much higher interest costs over time)

– Shop around for the lowest interest rate possible from multiple lenders

– Choose a used vehicle – their loans often have slightly better rates

– Enroll in auto-pay discounts from your bank account rather than credit card


Finding the optimal balance between a reasonable monthly payment you can manage and avoiding excessive interest charges over a very lengthy loan term is key when financing a car.


Here are some smart strategies to pay off your auto loan faster and save on interest charges:


– Pay half your monthly payment every two weeks instead of once a month


– Pay rounded up payment amounts each month (e.g. $387 instead of $385)


– Make an extra principal only payment whenever you have extra funds


– Refinance at a lower interest rate through another lender (if credit has improved)


– Sell the car and use proceeds to eliminate the loan balance


– Apply any tax refunds, cash gifts or bonuses directly towards principal


The more excess you can apply directly to the loan principal rather than just your monthly payment, the faster you can become car debt free. Just check first for any prepayment penalties with your existing lender.

As you near the end of your car loan repayment term, you have three main options:


  1. Keep driving the vehicle and take ownership once the loan balance reaches zero


  1. Use your accumulated equity towards a trade-in on another car


  1. Sell to a private party if the car would fetch more than the payoff amount


Ideally you still like the car and it’s in good shape mechanically. This allows you to keep driving it payment-free as long as you want. Just be sure to set aside savings for repairs and maintenance costs no longer covered by warranty.

Getting pre-approved for a car loan does not negatively impact your credit score. Soft credit inquiries from pre-approval applications are visible only to you rather than future lenders reviewing your full report. This allows you to easily compare loan rates across multiple lenders with no penalty.


Only once you finalize a loan does the hard inquiry appear indicating you’ve opened new credit. As long as your overall utilization and payment history remain sound, this type of expected auto loan activity should not damage your score. Monitoring your credit report activity frequently is recommended however.

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