Car loans in Quebec: what you need to know!

Car loan at Arbor Volkswagen

Are you looking for a car loan that will help you purchase a new or used vehicle? Arbour VW, on the North Shore of Montreal, in Laval, close to Boisbriand and Blainville, gives you all the key information you need in order to better prepare.

Firstly, you must understand that there is a difference between a car loan and a personal loan, used to purchase a new or used vehicle. Before deciding between both, read this blog below, as it will provide you will useful info.

The insurance broker explains to his clients how an auto loan works.

How does a car loan work?

A car loan is different from a personal loan. The first is obtained directly with your car dealer at the time your vehicle is purchased, while the second can be given to you by your financial institution.

When you purchase a new or used vehicle, your dealership will offer a financing plan which includes the amount for the loan, the current interest rates, the terms for the loan and the period of time covered by the loan or financing.

Advantages and disadvantages of a car loan

There are several advantages to a car loan. The first is, without a doubt, that it will come with a lower interest rate than a personal loan would, with your bank. 

Since a car loan really is an instalment sale contract whereby the vehicle is used as a guaranty for the loaned sum, it remains much more advantageous than a personal loan.

Family walking through dealer showroom, looking at automobile.

Moreover, the car loan will be obtained much more quickly through your dealership than a personal loan would be, through your financial institution; you would have to provide more information about your situation, the vehicle you want to purchase, etc. Approval delays are usually null with your car dealership or, in other words, the loan is instant.

Since interest rates are also more competitive with car dealerships, you could also decide to opt for a vehicle with added or extra equipment.

Another significant advantage: the car loan is only activated once you receive your new or used vehicle. On the other hand, the personal loan becomes active immediately, which means at the time the money is deposited into your account, even if that is before your receive your car.

On the other hand, the car loan links you to the dealership for the duration of the leasing or financing contract. This means you are indebted to the automobile manufacturer’s financial services and you must abide to all of the conditions listed in the contract.

Now you know how to obtain a car loan! Let’s move on then, to another –just as important- question.

How to be approved for a car loan?

More and more now, car dealers are offering different types of financing for your vehicle, including first, second and third chance credit. Even if the interest rates may differ for second or third chance credit, your car dealership might still agree to loan you the sum for the vehicle of your dreams and will calculate the total loan.

The best way of being approved for a car loan with a good interest rate remains having a good credit score (630 or more). This score is obtained through Equifax or TransUnion and it will ensure financing for your vehicle. If you have always paid your credit cards on time (and don’t have too many), and if you have always kept your debts low, there is no reason why you would not easily be approved for a car loan. 

Couple signing car loan agreement at broker

Different steps for a car loan

Here is how a car loan usually takes place:

  1. The dealership will ask you how you would like to pay for your vehicle;
  2. They will then contact a financial institution that will agree to loan you the money;
  3. The financial institution will verify your credit score and obtain your credit history;
  4. You will make an appointment to sign your loan;
  5. You will take possession of your vehicle and begin paying back the loan according to the financing agreement.

Delays to pay back a car loan

Your VW dealership in Laval, for example, gives its customers access to Volkswagen Financing Plans. They can be flexible in time: 2 years, 3 years, 4 years, 5 years or even more. You will also have the choice between reimbursing your purchase and leasing your vehicle, depending on your budget.

broker offers to sign a car loan to a new immigrants

Car loan for new immigrants in Quebec

There are come car loans on the market for newly arrived immigrants or people with no previous credit score. They can be obtained quickly. However, you will have to put a down payment. Generally, the down payment will be between 15% to 25% for new immigrants and 10% for permanent residents.

Moreover, the maximum amount for the loan is generally $ 75,000. A car loan for new immigrants is usually also limited in time, which normally translates into 60 months for new immigrants and 96 months for permanent residents. Other conditions may apply, like how old the purchased vehicle is, etc.

Since car dealers can deal with several different financial institutions, some of them may offer more advantageous car loans for new immigrants than others, including some that cover longer periods too.

Credit score for car loans

If your credit score is 630 or more, the financial institution will not ask many questions about you.

If, on the other hand, your credit score is 520 or less, financial institutions will most likely prefer a customer with a credit score that is higher than 600. The good news is, your VW dealership has solutions to offer. One thing is for sure, for those of you who have experienced financial difficulties in the past, there is a second and third chance credit financing available.

Mistakes to avoid when asking for a car loan

In order to better your odds of being approved, here is some important advice:

  • Avoid accumulating credit requests. Each time you do, your credit history suffers.
  • Do not spend more than you make.
  • Do not accumulate debt or credit cards.

These points are very important and will prove useful when the time comes for you to ask for a car loan.

Frequently Asked Questions

If your car loan has been denied, one of the first things to do is to talk to the person in charge of financial services to explain in greater detail your current situation. You could also ask for an alternative financing plan.

If financial difficulties should arise before you finish paying for your loan, it is important that you contact financial services and find a solution that will be acceptable both to you and the automobile manufacturer, as well as allow them to fulfill their requirements.

Generally, interest rates for second chance credit vary between 10% and 29%.

There is standard financing, which is the current rate offered by the dealership, then there is second and third chance credit financing.

Before signing your leasing or financing contract for your vehicle, it is always possible to tell your salesman of your intentions.


In summary, you now know how to obtain a car loan, how the loan is calculated, what type of interest rate to expect and much more…

At Arbour VW in Laval, we can help you choose the best financing option for you. That is precisely our objective: finding the best purchasing or leasing solution for your needs. Come and visit us today.