Car Loans Getting Easier

Loan Approvals Have Risen To Their Highest

First Published Date: June 28, 2009

Canadians looking to purchase a new car in the second half of 2009 should find it easier than they did a few months ago, according to a new report which gives broadly positive news on the likely availability of car loans for new customers. The report, released this Thursday, 25 June 2009 says that loan approvals have risen to their highest level in more than a year, and since the recession was declared. At the time of the recession’s onset, getting credit for any purpose became a great deal more difficult, with affordable loans comparable to the Golden Fleece for anyone not in possession of a world-beating credit score. With financiers more willing to lend now than they were a year ago, the motorist is getting a green light to secure funding for the vehicle they want.

The main reason for this ease would seem to be the federal government’s move to secure the finance of $12billion worth of car loans which will allow the financing companies to lend to deserving customers who have a decent credit rating. In any recession there will be a reluctance to lend to anyone but the absolute “can’t miss” customers, who often have little need for a loan in order to buy a car and borrow more for convenience than out of necessity. This latest move will open up the chance to buy a new car to a wider range of individuals and allow a greater fluidity of cash through the industry, which will in turn help stimulate an economy in need of some good news as it battles its way through the recession.

The withdrawal of some major lenders from the auto-loan business over the past year is also believed to have played a major part in the absence of credit – with the Bank of Canada being a notable exception. The car companies themselves, though, had in no small part either removed their lending branches or increased the credit score necessary for them to forward credit to new customers. Although there is good reason for being circumspect in giving out new car loans, it did have the effect of creating a vicious cycle which saw fewer customers able to buy cars, and consequently fewer cars being bought.

The overall impression emerging from the latest news is that the credit-worthiness and the intent to buy new is experiencing a rise in Canada and that there will be increased growth in the Canadian auto market as the year progresses. Household credit ratings are improving as the lessons of the recession are learned, and in combination with an increase in the amount of retail and durable goods purchases over recent months, the least that can be said is that the worst of the recession is over. How quickly this translates into growth of a reasonable amount remains to be seen, but it is a relief for any financial commentator to be able to say that better days are very nearly here. How much better depends on how ready people are to believe it.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on June 28, 2009.