Risky business: Treat subprime vehicle finance deals with caution

Published On
May 29, 2023
Written by: Graham Michaels – Automotive, Technical, and Business Writer

Low credit scores often mean high-interest rates and fewer vehicle choices. Don’t sign until you’re sure

Nothing in life is free – especially when you borrow money to finance a major purchase. Credit is a popular way to fund a new or used vehicle in Ontario but – as with a vehicle purchase contract – there is no statutory cooling-off period once you’ve signed a finance agreement. As such, it is an extremely difficult hole from which to escape if you discover problems with the deal after the fact or realize you cannot afford it.

OMVIC, Ontario’s motor vehicle sales regulator, advises buyers to check the fine print before they sign a finance agreement and to shop around for the best credit offers. But what if a poor credit score means you don’t have the luxury of competing finance options from mainstream lenders? What if there’s only one deal, or even only one car, on the table?

“The most vulnerable customers are people with no credit or bad credit,” says Tim Hines, OMVIC’s director of consumer support. “They are the most susceptible to the risks of financing a new/used vehicle. The sales process may be completely different from the regular scenario of going into a dealership, choosing a vehicle, and then looking at finance options. We urge consumers to take their time to fully review the vehicle and contract prior to signing.”

OMVIC’s consumer support team is always available with advice if you’re unsure at any stage of the vehicle-buying journey. It’s always better to ask a question before signing, than after.

Hines explains that if you find yourself in a situation where you’re being asked to sign a finance agreement before you’ve had the time to properly review the vehicle or the contract, it’s probably best to walk away.

“Once you sign that finance agreement, there’s likely no going back,” he continues. “At the consumer support team, we have tough conversations with people every day who have found problems after signing. Don’t sign until you understand the agreement and are 100% comfortable with its terms and their implications.”

Whatever your position, it’s important to inform yourself of your credit situation before you start the buying process. Buyers can obtain their credit score upfront from an independent agency like Equifax or TransUnion Canada before shopping for loans.

If you’re looking for further advice, OMVIC is there to help consumers navigate the process of buying a new or used vehicle and ensure dealers comply with the law. Visit OMVIC.ca to access free car-buying resources to get you started and sign up for the quarterly newsletter, Consumer Line.

You can also contact OMVIC’s consumer support team at [email protected] or 1-800-943-6002 for expert advice and answers to all your car-buying questions, or if you have a complaint about a dealer or salesperson in Ontario.