Now that even Moody's loves us for our fiscal probity, Canadians risk becoming smug as we look south and see all that economic mess and devastation.
But even smug Canadians can learn valuable lessons from the credit-unworthy masses in the United States. Yes, yes, the situations in each country are very different, but another's misfortune always contains a cautionary tale.
So consider: one in three car buyers in the U.S. has a less-than-perfect credit score, according to carfinance.com. That's in large part down to the fact that, as economist Sherry Cooper notes in a BMW Financial Group note, as of February the U.S. foreclosure inventory had 1.4 million homes, representing 3.4 per cent of all homes with mortgages.
By contrast, writes Cooper, "Canada's severe mortgage delinquency rate was a Lilliputian 0.38% compared to the peak 5.02% rate in the U.S. In Ontario, it was a mere 0.28%, and it was a bit higher in British Columbia at 0.47%. Basically, Canadians rarely default on their mortgages." Thus, Canadians collectively have better credit scores.
We don't have an emerging cottage industry of experts offering advice, as carfinance.com notes, "specifically designed to help empower car buyers with less-than-prime credit." Yet advice for the woebegone car buyer can help anyone, regardless of credit score, avoid auto financing mistakes. With new vehicle sales up 8.4 per cent on the year in Canada, Deals of the Week believes that plenty of buyers should take to heart what carfinance.com calls the top five auto financing mistakes to avoid.
- Thinking you can’t get financed: Many of those diligent about maintaining a credit score remain just slightly nervous when the time comes to get actually rated. If you’re worried, go online and pay a small fee (about $15 in most cases) to see your score. To maintain your credit score (or improve it), pay bills on time, avoid bankruptcy, foreclosure and repossession, and have a steady income.
- Not doing your homework on yourself: Research your own credit rating so that you can be confident and project confidence when you walk into that dealership – know what your benchmarks are in terms of what you aim to pay for the car you want, and what finance rate you can expect. If those numbers don’t fit into your financial window, have the confidence to say no and walk away.
- Not doing homework on everything else: You simply must comparison-shop the available finance rates; don’t rely solely on the dealer’s interest rate. Consult multiple resources to find out what the real price of your target vehicle should be – both the manufacturer's suggested retail price (MSRP) and invoice, as well as all incentives on that vehicle. Use online calculators to figure out what you can actually afford each month and what the monthly payment would be on a range of loan amounts with varying interest rates. Approach it like a research project; the work will pay off.
- Not keeping the car purchase and financing process separate: Know exactly how big a loan you can afford, and know the type of vehicle that best suits your needs and negotiate the vehicle price and the loan separately. Everything needs to be understood and negotiated in isolation: the length of the loan, the value of your trade-in and the true cost of any add-ons.
- Not having good records: To become approval-worthy, you must be able to show proof of income/employment, as well as proof of insurance and proof of identity. Have all the documents you will need at your fingertips.
This being the first week of the month, car makers in Canada have juggled many of the deals out there. Here are four worth looking out for as you contemplate these financing mistakes to avoid.
As usual, Deals of the Week obtained pricing information from www.carcostcanada.com, among other sources. Here are the numbers.
2012 Hyundai Santa Fe AWD GL Premium
Hyundai showed the all-new 2013 Santa Fe at the New York auto show this week, and while it won't hit dealerships for a month, we all know that a buying opportunity arrives the moment an auto maker unveils a new or replacement model.
- MSRP: $29,699
- Freight, dealer prep, air conditioning tax: $1,860
- Dealer discount (estimated): $1,000
- Factory discount: $3,500 (Non-stackable Trading Dollars factory-to-dealer rebate)
- Taxable subtotal: $27,059
- Total price with 13% HST: $30,576.67
- Can be combined with 3.25% financing for up to 96 months
2012 Mazda2 GX
Mazda Canada president Don Romano says his company is committed to the compact car segment in Canada, even though it is competitive and barely profitable, if at all. The incentives are intended to keep the Mazda2 attractive to buyers with many options.
- MSRP: $14,095
- Freight, dealer prep and air conditioning tax and Green Levy: $1,595
- Dealer discount (estimated): $400
- Factory discount: $1,500 (Mazda Retail Cash factory-to-dealer rebate)
- Taxable subtotal: $13,790
- Total price with 13% HST: $15,582.70
- Factory rebate: $250 (Owner Loyalty discount factory-to-customer rebate)
- Final price: $15,332.70
2012 Infiniti M37
Infiniti is starting to make a serious push to boost sales, and the M37 in one beneficiary.
- MSRP: $52,400
- Freight, dealer prep, AC tax: $2,050
- Dealer discount (estimated): $2,100
- Factory discount: $2,000 (Non-stackable Merchandising Dollars factory-to-dealer rebate) (slated to expire April 2)
- Taxable subtotal: $50,350
- Total price with 13% HST: $56,895.50
2012 Dodge Ram 1500 2WD Quad Cab ST
A new Ram pickup is coming later this year, and we saw many of the details at this week's New York auto show. In the meantime, the Ram is being boosted by some of the richest offers anyone has ever seen.
- MSRP: $31,070
- Freight, dealer prep, AC tax: $1,600
- Dealer discount (estimated): $1,100
- Factory discount: $9,750 (Consumer Cash factory-to-dealer rebate)
- Taxable subtotal: $21,820
- Total price with 13% HST: $24,656.50
- Can be combined with 4.99% financing for up to 96 months
Pricing information source: carcostcanada.com. Calculations based on Ontario customers. Please note that while the information above is accurate at the time of publication, incentives are given at the discretion of individual dealers, and may be changed or discontinued at any time. Dealer discounts are negotiated with the customer on a case-by-case basis.