Protect yourself against risks when financing a vehicle

When purchasing a new or used vehicle, it’s important for consumers to identify how they’ll finance the purchase. Buying a car is the second most important purchase most consumers make next to buying a home, so protecting your finances and understanding the risks related to vehicle financing are key to ensure a smooth purchase.

Before signing on the dotted line for a vehicle, carefully consider the interest rates and financing options offered and take steps to ensure you get the best possible finance rate and terms. Remember there is no cooling-off period in Ontario so once you sign a contract you are committed to the purchase. Here are some possible risks and how to protect yourself as a consumer.

Know who your credit application is being submitted to

Before visiting a dealership, contact your financial institution and ask about your credit score and the financing options available to you based on your score. Knowing this beforehand allows you to “comparison shop” with the financing available at the dealership.

If the dealer is arranging financing, they may submit your loan application to multiple lenders. However, you should make it clear if you do not want your credit to be checked by multiple lenders, as multiple credit applications can negatively impact your credit score. To protect yourself, ensure you know exactly who your application was submitted to and ask about each lender’s offered terms and rate.

Make sure your credit application is accurate

Always verify the accuracy of information provided on your credit application before it’s submitted. There have been cases where credit applications have been submitted with inflated incomes or minimized debts to help get an application approved. This is not only unethical, but also illegal.

Carefully review the information on your application before signing and allowing the dealer to submit it and request a copy of the loan application for your records.

Most importantly: you should walk away if you notice errors or misrepresentations on your application that the dealership refuses to correct, or if the dealer suggests these corrections will limit your likelihood of being approved. This is a clear sign of an unethical dealer who does not have your best interests in mind.

Always carefully review your contract

When accepting delivery of a vehicle, take the time to read the entire agreement. Confirm the stated terms and rate on the contract match what was promised to you, along with what was signed and agreed to on your bill of sale. If a dealer or salesperson makes a verbal promise, make sure it always appears in writing on the contract to ensure you’re protected.