Man and woman looking anxious at paperwork and holding a help signFor some people, it is difficult to get leasing or financing when buying a vehicle. It might be because you have bad credit due to previous bankruptcies or other financial difficulties, or you just immigrated to Ontario and have no credit history at all. The problem is that when you try to get a lease or a loan to buy a car, the bank or dealership runs a credit check and see their history of bad or no credit history. If they think that you are a risk and might fail to make their payments, they are more likely to deny you.

However, this does not necessarily mean that you won’t be able to get a lease or loan as there are ways to improve your bad credit or grow your credit history from nothing. Here is our guide to help you buy a car regardless of your credit situation.

Buying a Car with Bad Credit

If you are someone with bad credit, you can still get a loan or a lease in order to buy a car but it will be more difficult and with greater limitations. The interest rates and monthly payments will be higher and you will likely only be able to get a smaller loan or lease for a less expensive car.

There are also some ways to help make it easier to get a lease or a loan:

  • Check Your Credit Score — do it a few months ahead of time so you have time to fix any issues and improve your score as a result
  • Save Up — if you can make a bigger down payment you’re more likely to get approved, and if you can buy a car outright then you don’t have to worry about approval at all
  • Get Pre-Approved — go to a bank ahead of time and see if you can get pre-approval on a loan
  • Target Cheaper Cars — search for vehicles that are less expensive since they would come with a smaller lease or loan
  • Contact Specialized Lenders — some lenders specialize in bad credit loans and have more experience with your type of situation

Depending on how bad your credit is you might only be able to get a small loan on a cheaper used car, or have to just buy it outright. If you are not in desperate need to buy a car it would help to take more time to save up a larger down payment and improve your credit score as much as you can.

Did You Know? Interest rates for people with bad credit or no credit range between 10% and 29.5%, whereas for people with optimal credit usually get interest rates of 10% and lower. It makes improving your credit and having a big down payment very important!

Buying a Car with No Credit

If you have no credit at all to speak of, you are a complete mystery to banks and other lenders-they have no idea how good or bad you are at being financially responsible and making payments on time. Even if you have a job that pays more than well enough, it will still be a problem.

This is a particular problem for new immigrants to Canada, who do not have any established credit in the country. Your financial history outside of the country is not counted as relevant. To remedy this, save up your money for a bigger down payment, target cheaper vehicles, and find lenders who specialize in working with new Canadians.

It would also help to learn how credit works in Canada, so you understand the process and know what to expect. The other way to make getting a lease or loan easier is to build up your credit in Ontario.

Did You Know? There are over 100,000 new immigrants to Ontario every year, especially to Toronto and the surrounding suburbs like Mississauga. Around one-quarter of these new Ontarians expect to buy a car within a year or two of their arrival. Some banks now have programs designed to help immigrants with no history buy cars at dealerships.

Improve and Build Your Credit

If you want to improve your bad credit or build your credit as a new Canadian, the Financial Consumer Agency of Canada (FCAC)has some suggestions that you can follow:

  • Pay all of your bills on time and in full: rent, phone, internet, utilities, and so on
  • Pay off any debt as soon as possible
  • Avoid making any credit applications beyond what you already have, if possible
  • Open a credit, loan, or bank account with small limits and pay them off as soon as you can and don’t go over the limit

Taking on loans, bank accounts, and credit cards with small limits and payments is a great way to build your credit. They’re easier to get than bigger loans, like for buying a car, and they’re easier to pay off. They show any banks and lenders that you have some history of making payments on time, so they will trust that you can pay off a bigger loan too.

These tips also help re-build your bad credit too, along with paying off all debts that were causing your bad credit in the first place. Getting a secure credit card is a good method. You have to make a cash deposit or security payment to guarantee your payments, but because major credit companies get reports of your activity you help improve your score every time you make a payment.


Hopefully these tips will help you realize that your situation is not hopeless, regardless of how bad your credit situation might seem. There are ways of repairing your credit score or building it up from scratch if you are a new Canadian, and there are still ways of buying a car even with bad or no credit. Always remember to do your research and preparation ahead of time so you avoid any costly mistakes – and you’ll make the whole process a lot easier and less stressful. Good luck!


You might also be interested in these guides:

How Financing and Leasing Vehicles Work?
How Lease Payments Are Calculated?
How to Get Get Out of a Car Lease Early in Ontario?
How to Buy a Car in Ontario as a New Immigrant?