Car Deal Canada

OAC Meaning in Car Loans

OAC Meaning in Car Loans

When shopping for a new or used vehicle at a dealership in Canada, you’ll inevitably come across the acronym “OAC” in the financing offers. OAC stands for “On Approved Credit,” and it’s a term you need to understand if you want the best deal on your next auto purchase.

OAC indicates that the low interest rates and attractive monthly payments advertised require credit approval. The rates are conditional based on you meeting the lender’s standards through a credit check. OAC gives dealerships and lenders leeway to adjust the specifics depending on your creditworthiness.

In this comprehensive guide, we’ll explain everything you need to know about OAC auto financing. You’ll learn what criteria lenders use to approve borrowers, how credit scores impact interest rates, tips for getting approved, and much more. Whether you have good credit or bad credit, understanding OAC is key to saving money on your next car loan.

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What Does the Acronym OAC Stand For?

OAC stands for “On Approved Credit.” It is an acronym commonly seen in vehicle financing offers from dealerships and lenders across Canada. When a dealership advertises a certain interest rate or monthly payment as OAC, it means approval for that promotional rate is conditional based on the buyer’s credit profile.

Essentially, OAC signifies that the attractive auto financing terms being advertised will only apply if the individual buyer meets the credit requirements of the lender after a full credit check. The interest rate, loan length, and monthly payment shown in the offer depend on each applicant getting credit approved based on their unique financial background and credit scores.

So while the deal may sound enticing up front, seeing the OAC designation indicates there are stipulations attached based on clearing a credit approval process. The advertised financing terms are not guaranteed for every buyer, but rather conditional upon having an acceptable credit standing that meets the lender’s approval criteria.


Why Do Dealerships Use OAC Offers?

Dealerships utilize OAC or “On Approved Credit” frequently in their auto financing promotions for a couple key reasons:

First, OAC gives dealers flexibility to adjust interest rates and terms based on each individual buyer’s credit profile. By making an offer OAC, the dealer avoids having to quote the same rate to every customer. Instead, they can offer very attractive rates in ads and on vehicles to draw in customers, then adjust the specifics depending on credit checks and risk.

Secondly, OAC allows dealers to advertise enticing rates and monthly payments to generate interest and leads. Even buyers with less than perfect credit may be pulled in by a deal that looks great, only to find out they don’t actually qualify for the best terms based on their credit. The OAC designation gives the dealer an “out” if a buyer can’t meet lending requirements for the advertised rate.

In summary, OAC offers provide wiggle room for dealers to adjust financing terms to match each buyer’s unique credit profile. They also enable advertising eye-catching rates to attract customers, even if many won’t qualify for the very best terms on the lot.


What Do Lenders Evaluate for OAC Approval?

When you see an attractive interest rate or monthly payment listed as “OAC” at a dealership, it means meeting those terms is conditional on getting approved by the lender. So what exactly will lenders look at when evaluating your credit for auto financing on approved credit?

Here are the key factors considered in an OAC credit check:


  • Credit Score – This three-digit number summarizing your creditworthiness is one of the top criteria. The higher your score, the lower the interest rate you can qualify for with OAC.
  • Debt-to-Income Ratio – Lenders calculate your DTI by dividing your total monthly debts by gross monthly income. A lower ratio indicates you have more available income to make car payments.
  • Payment History – Having a track record of paying past debts and loans on time will help your OAC approval chances. Late payments can negatively impact offers.
  • Length of Credit History – How long you’ve been using credit overall gives lenders insight into your experience managing accounts. A longer history helps your case.


While not a comprehensive list, these key areas give a sense of what goes into the OAC approval decision when you finance a car purchase. Maintaining a strong credit background in these categories will put you in the best position to qualify for advertised offers dependent on credit checks.


How Credit Score Impacts OAC Car Financing

Your credit score is one of the most important factors lenders consider when evaluating you for OAC auto financing. In general, the higher your credit score, the lower the interest rate a lender will offer on your car loan. Those with excellent credit scores of 720 or above can qualify for the best advertised OAC rates, usually under 5% APR.

Consumers with good credit in the 660-719 range may get approved for OAC offers at slightly higher interest rates around 5-7% APR. Buyers with fair credit scores between 620-659 can expect to pay more in interest, with rates from 8-12% APR on an auto loan OAC.

For those with poor credit below 620, OAC approval will still be possible in many cases, but interest rates will be significantly higher, regularly 15% APR or more. The lower your credit score, the more risk you represent to lenders, so they offset that by charging higher rates on OAC auto financing.

In the end, individuals with poor credit pay thousands more in interest costs over the lifetime of an auto loan compared to those with excellent scores qualifying for the lowest OAC rates. Maintaining a robust credit profile is key to saving money on interest and getting approved for attractive OAC car financing offers.


Monthly Payment Amounts and OAC

One of the biggest impacts that getting approved for OAC financing has is on your monthly car payment amount. This is tied directly to the interest rate you are able to qualify for based on your credit profile.

Buyers with excellent credit scores in the range of 720 or higher will typically get the lowest interest rates from lenders. This means they’ll pay less interest charges over the course of the auto loan. In turn, their monthly payments will be lower compared to someone with poor credit who is paying a much higher interest rate.

For example, on a $30,000 5-year car loan, a buyer with good credit paying 5% APR would have a monthly payment around $575. But a buyer with bad credit paying 15% APR on the same loan would end up with a monthly payment closer to $665.

So while the advertised monthly payment or interest rate may look attractive, what you actually end up paying each month will vary significantly depending on your individual credit approval terms. Having strong credit means saving money each month and over the life of your auto loan thanks to lower OAC rates.


Getting Approved for OAC Car Financing

Getting approved for car financing under the OAC terms can be easier with some preparation and understanding of what lenders are evaluating. Here are some key tips for buyers to boost their chances of qualifying for the best advertised OAC rates when purchasing a new or used vehicle:


Check credit reports and scores in advance – Long before visiting dealerships, it’s wise to check your credit reports from Equifax and TransUnion to understand your current credit standing. Look for any errors that need correction and examine your credit scores. Online services like Borrowell provide free credit scores and reports. Knowing your scores gives you an idea of rate ranges to expect.


Pay down debts to lower utilization rate – Lenders look closely at your credit utilization ratio, which is your total balances divided by total available credit limits. Keeping this ratio low demonstrates creditworthiness. In the months before applying, try to pay down card and loan balances to reduce utilization. You can also ask issuers for higher limits.


Avoid new credit inquiries before applying – Each application for new credit results in a hard inquiry on your credit file. Too many recent inquiries can negatively impact your score and perceived risk. Minimize credit applications in the 6-12 months preceding your auto loan application to avoid extra hits.


The Importance of Down Payment Size for OAC Approval

When applying for auto financing OAC, the size of your down payment can play a pivotal role in securing approval, especially if your credit score is marginal. Lenders view a larger down payment as a sign that the buyer is financially committed to the vehicle purchase. It also immediately lowers the amount being financed, reducing the lender’s risk exposure on the car loan.

For applicants with less-than-perfect credit, putting more money down upfront can offset some of the perceived risk and increase the chances of getting approved OAC. Those with poor credit are considered higher risk borrowers, so lenders look for reassurances that they will recoup the loaned amount. Placing 20% or 30% down shows the lender you are capable of saving money and lessens the chance of default.

In contrast, buyers with stellar credit can qualify for OAC offers with little to no down payment in some cases. But for anyone with credit scores in the fair, poor, or very poor ranges, providing a sizable down payment improves the odds of dealership and lender approval OAC. It signals to the lender that the buyer understands the importance of a financial commitment to gaining auto loan approval despite past credit challenges.


Proof of Income Needed for OAC

When applying for auto financing OAC, lenders want to verify that you have the ability to reliably make the monthly payments. To assess this, they may request documents that confirm your income sources and stability.

One of the most common documents requested is recent pay stubs. These provide proof of your current salary and show consistency of employment. If you’re self-employed, the lender may ask for business bank statements or your most recent tax return instead.

Your tax return is another useful way to demonstrate income, especially if your pay is commission-based or fluctuates. The lender can get a good sense of your average earnings from your past year’s taxes.

Finally, personal bank statements may also be used to give insight into your cash flow. Lenders want to see enough regular deposits to cover the proposed car payment plus other financial obligations.

Having these income documents ready when you apply for an auto loan OAC will make the process smoother and improve your chances of approval. It gives the lender confidence you can handle the repayment terms based on your verified income sources.


Shopping Around for the Best OAC Terms

When you see an attractive low interest rate or monthly payment advertised at a dealership, it will almost always be tagged with “OAC.” This gives the dealer flexibility to adjust the rate based on your individual credit approval. The same vehicle make and model could carry a 3% rate for a buyer with excellent credit or an 8% rate for someone with poor credit. That’s why it pays to shop around and compare OAC offers from multiple lenders before committing.

Along with dealership financing, consider getting pre-approved through your own bank or credit union. The preapproval rate can give you negotiating leverage, or provide a favorable fallback option if the dealership comes back with a higher OAC rate than advertised. Banks, credit unions, and third-party lenders like Ally also offer direct auto financing you can research ahead of time.

Manufacturer financing through incentives like 0% interest deals can provide another attractive OAC alternative. For example, Toyota, Ford, or GM often run special financing offers on certain models. As long as your credit qualifies, you can take advantage of these OAC rates which may beat the general market for auto loans. Comparing all available OAC rates will help you find the best financing for your situation.


Leasing vs Financing OAC

For buyers who don’t qualify for attractive OAC financing rates due to credit challenges, leasing can provide an alternative path to driving a new vehicle with lower monthly payments.

With a lease, you only pay for the vehicle’s depreciation during the lease term plus interest, rather than the full purchase price. This results in a much lower monthly payment compared to financing the entire cost of the car.

Leasing also has lower qualification requirements than financing, making it accessible to those with poor credit or insufficient income to get approved for an auto loan OAC.

The main trade-off is that you don’t own the vehicle at the end of the lease. You have to return it unless you choose to buy it out by paying a lump sum purchase option price.

Leasing pros:


  • Lower monthly payments
  • Easier to qualify if you have poor credit
  • Drive a newer car more often with frequent leasing


Leasing cons:


  • You don’t build any equity in the vehicle
  • Mileage limits and wear-and-tear charges
  • Costs to buy the car at lease-end if you want to keep it


For cost-conscious buyers unable to get approved for auto loans OAC, leasing can be an effective alternative despite the tradeoffs. Just be sure to negotiate the best possible lease terms and purchase option price if you think you may want to buy the car later.


Avoiding Hidden Fees with OAC

When shopping for a vehicle with OAC financing, it’s important to be aware of any hidden fees that can get tacked onto the sale beyond the advertised price. Dealerships sometimes charge extra documentation fees, disposition fees, administrative fees and other charges that can add hundreds or even thousands of dollars to the overall cost.

With OAC offers, the fine print may allow the dealer to slip in these fees after securing your financing approval. So before signing paperwork, carefully review all itemized costs and ask the finance manager to explain any questionable fees.

You may be able to negotiate down or eliminate some of these fees, especially the administrative or doc fees that far exceed the actual costs of processing paperwork. It never hurts to ask politely if they can remove a particular fee from the final bill.

Additionally, dealers will often encourage extras like extended warranties, protection packages, or maintenance plans when you are in the finance office. While these services can provide value, they also boost the dealership’s profit margins. Carefully consider whether you really need each add-on before agreeing to it with OAC financing.

The key is reading through all documents fully and asking plenty of questions. Don’t let the finance office rush you through forms when buying a car on approved credit. Taking the time upfront to understand every charge can help you avoid hidden fees and keep your OAC purchase affordable.


Preapproval for OAC Financing

Getting preapproved for financing is a smart move before heading to the dealership if you want the strongest position in OAC rate negotiations. By securing an advance approval letter, you’ll know your maximum budget and the rates you qualify for based on your credit profile.

Armed with a preapproval, you can shop confidently and compare the dealer’s OAC offer against your backup lender’s terms. If the dealer can’t beat the APR and monthly payment quoted in your preapproval, you have the leverage to negotiate a better financing deal on the spot.

Preapproval letters are usually good for 30-60 days. Having a recent one in hand shows the dealership you are a serious buyer who has already done their homework. It forces the finance manager to sharpen their pencil and work hard to earn your business.

Along with better leverage on the OAC rate, preapproval gives you peace of mind. You’ll know that financing is secured even if the dealer’s offer falls through. This takes the stress out of purchasing and gives you freedom to walk away if the dealer won’t match your preapproved terms.


Other ‘On Approved Credit’ Offers

The OAC or “On Approved Credit” designation isn’t just used for auto financing. You’ll also commonly see it when shopping for other large purchases that require financing such as:


  • Homes – Mortgage lenders advertise interest rates “OAC” to indicate conditional approval based on borrowers’ credit and income.
  • Recreational Vehicles – RV dealers promote attractive financing terms “OAC” for motorhomes, travel trailers, and campers.
  • Furniture – Furniture stores often offer “No interest for 12 months OAC” deals on financing for big purchases.
  • Appliances – Retailers selling appliances like fridges, stoves, and laundry pairs highlight special financing “OAC.”
  • Electronics – Stores advertising 0% financing on TVs, computers, and other electronics note terms are “OAC.”


The key point is that across all these major financing offers, the OAC designation means the rate and terms are subject to individual approval based on a credit check. Each lender will assess applicants based on their own lending criteria to decide if they qualify for the conditional financing deals.

So when you see OAC attached to any advertised finance offer, be sure to verify you meet the credit score, income, and other requirements to take advantage of the deal before assuming you’ll automatically get that rate.



In summary, the term OAC or “On Approved Credit” is an important one to understand when shopping for a new or used vehicle and seeing advertised financing rates. It indicates that the interest rates and monthly payments presented are conditional upon your individual credit approval.

Lenders will check factors like your credit score, debt-to-income ratio, payment history and types of credit accounts when deciding to approve your application and at what interest rate. Those with excellent credit are rewarded with the lowest rates, while those with poor credit will pay higher interest costs over the loan term.

To get approved for the best possible OAC terms, focus on improving your credit background in the lead-up to buying a car. Pay down debts, maintain low balances, avoid new credit inquiries, and prepare to put down a sizable down payment. Seeking pre-approval can also help you enter negotiations knowing what rates you qualify for.

While the OAC designation means conditional approval, you can still leverage advertised offers by putting in the work to build a strong credit profile. Knowing the ins and outs of On Approved Credit will help you shop for vehicles with confidence and secure competitive auto financing terms.

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Questions About What OAC Means

OAC stands for “On Approved Credit” in the context of auto loans in Canada. It indicates that the advertised interest rate, monthly payment, or other loan terms are contingent on the buyer having approved credit. Approval criteria can vary by lender but generally involves factors like credit score, income, and debt-to-income ratio. If a buyer does not meet the qualifications for approved credit, different loan terms may apply.

The minimum credit score to qualify for OAC auto financing can range between 600-700 depending on the lender. Most mainstream lenders like banks and credit unions generally require a score of at least 650. Subprime lenders that specialize in applicants with poor credit may approve scores around 600. The better your credit score, the more likely you are to qualify for the best advertised OAC terms.

If you don’t qualify for OAC financing, you still have options:


– Apply with a subprime lender that specializes in applicants with poor credit

– Get a cosigner with better credit to apply with you

– Work on improving your credit – by paying down debts, avoiding missed payments etc. Once your score meets lender thresholds you may qualify

– Save up and buy a less expensive used car with cash


While options exist, expect to pay much higher interest rates compared to OAC loans if you have subprime credit. Weigh the costs carefully before committing.


When applying for OAC car financing, most Canada lenders require:


– Proof of income – Recent pay stubs, T4, tax returns

– Government-issued ID – Driver’s license, passport

– Proof of address – Utility bill, bank statement

– Down payment

– Information on the vehicle you wish to purchase – Make, model, year, selling price


Having these documents ready will help speed up the pre-approval and financing process.

The typical down payment expected for OAC auto financing approval is between 5-20% of the vehicle purchase price. Minimum down payments usually start around 5-10%. Putting 20% or more down shows the lender you are financially committed and less of a risk, improving your chances of OAC approval.

Most mainstream Canada lenders offer maximum auto loan terms of 6 years (72 months) for OAC financing. A few may stretch up to 7 or 8 years for very good credit applicants making large down payments. Loan terms over 6 years result in paying much more total interest so shorter terms like 2-4 years are recommended whenever possible.

Watch out for these common fees with Canadian OAC car loans:


– Origination fee – Upfront fee to process loan, can be 1%+

– Prepayment penalties – Charges for paying loan off early

– Documentation fees – Charges for preparing loan documents

– Extended warranty costs – These are typically optional


Ask your lender for full disclosure of rates, terms, fees in writing before signing anything.


The main differences between leasing and financing a car through OAC in Canada include:



– Do not own vehicle

– Lower monthly payments

– Return vehicle after lease term

– Mileage limits typically apply



– Own vehicle once loan paid off

– Higher monthly payments

– Repay loan over defined time period

– No mileage restrictions

Some credit unions known for competitive OAC auto loan rates include:


– Coast Capital Savings Federal Credit Union

– FirstOntario Credit Union

– Meridian Credit Union

– Steinbach Credit Union

– BlueShore Financial Credit Union


As full-service financial institutions, credit unions can offer very good lending rates while providing excellent member service.

Most major Canadian banks occasionally offer 0% OAC financing promotions on select new car models as a partnership with auto manufacturers. Banks known to offer these deals include:


– Royal Bank of Canada

– Toronto-Dominion Bank

– Bank of Montreal




However, 0% interest promotions typically come with restrictions – limited vehicles makes/models, very short 1-3 year loan terms, and a specific end date.

If a dealership does not honor clearly advertised OAC loan terms, first raise the issue with the dealership finance manager or general manager. If no resolution, file an official complaint with the provincial automotive sales regulator – OMVs in Ontario, VSA in B.C etc. You can also report deceptive lending practices to the Financial Consumer Agency of Canada to prompt an investigation.

Helpful sites to research current average new and used car loan interest rates in Canada include:


– Bank of Canada Trends in Borrowing Rates Report

– auto loan rate comparison tool

– auto financing rate checker

– auto debt statistics by province


Review both average and “advertised best” rates to set realistic expectations before applying for OAC financing.

If your credit standing needs improvement first, helpful steps include:


– Pay all credit accounts on time each month

– Pay down credit card and debt balances

– Check credit reports and resolve any errors

– Avoid taking on new credit or loans for now

– Build savings for a larger down payment


Give yourself at least 6 months to improve your credit and financial profile before expecting to qualify for OAC auto loan terms.


If you are unable to qualify for auto financing in Canada right now, some alternatives to build towards vehicle ownership include:


– Improve credit and reapply later once score meets requirements

– Save up to buy an affordable used car with cash

– Use public transit for now until you can finance a car

– Consider peer-to-peer car sharing platforms like Turo

– Explore car lease takeover sites to assume someone else’s lease at lower rates


Review all options as well as their costs before committing to anything long-term.

Warning signs an OAC offer could be a bait and switch tactic include:


– Terms say “starting at”, “for qualified buyers” etc. but actual criteria unclear

– Monthly payment examples based on large down payments not disclosed

– Very few models actually qualify for advertised interest rates

– Loan term lengths unrealistic to qualify for payment amounts stated

– Finance manager insists only higher rates available once credit check run


If an OAC deal seems “too good to be true”, tread carefully as it may come with unrealistic exceptions.

If you suspect OAC auto financing bait and switch:


  1. Voice concerns directly to dealership management
  2. Review all documents provided during purchase process
  3. File complaints with provincial automotive regulator and the Financial Consumer Agency of Canada
  4. Consult an attorney regarding any applicable consumer protection laws that may have been violated
  5. Share experience reviewing dealer online to make others aware


There are channels available to report and seek recourse for dealership OAC financing abuses.

Those struggling to obtain fair OAC auto loans due to past credit problems do have options, including:


– Specialty subprime lenders provide financing, albeit at higher rates

– Use a reputable credit counseling agency to legally rebuild your credit standing

– Explore peer-to-peer car sharing platforms to save on vehicle costs short-term

– Purchase affordable used car with high km for cash from private seller rather than financing


Avoid predatory “buy-here-pay-here” dealers promising easy financing approvals. Their effective interest rates end up extremely high.

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