What’s the Deal With Guaranteed (or 99.9%) Approvals?

By: Western Used Vehicles   |   30 Nov 2017
What’s the  Deal With  Guaranteed  Approvals?

If you need an auto loan but don’t have a great credit score, it’s easy to be tempted by claims from dealerships that guarantee approval for vehicle financing. Many claim they can get a loan for 99.9% of people who apply. In this case, while it’s technically true, the devil is in the details.

Too Good to Be True

The old saying, “If it’s too good to be true, it probably is”, applies to these guaranteed loan places. When you read the fine print, you’ll see why they aren’t always a great deal for the consumer. There is also a little bit of wordplay involved here. You see, in order to be approved you have to meet certain criteria, but if you don’t meet the criteria, you can’t apply.

Conditions for Approval

Generally, if you meet the following conditions you’ll be approved for some form of car loan*:

Checkmark​ Be 19 years of age or older

Checkmark​​ Be working full time for at least 6 months (If you’re a seasonal worker, you’ll need to have worked for two full seasons)

Checkmark​​ Have a $1,800 a month income before taxes ($10.39/hr and up working 40h/wk)

Checkmark​​ Have no prior automotive repossessions​

If you meet these conditions, you’ll generally be approved for a loan with an interest rate ranging from 4.99% to 29.5%, depending on your credit history and the year, make, and model of the vehicle you’re looking to finance. If you meet the minimum conditions you’ll typically be approved for a $400 monthly payment. This will give you a rough idea of the type of vehicle you’ll be able to afford.

*Note that these conditions are based on a Newfoundland Automotive Loan with an actual bank

What About Buy Here, Pay Here Dealers?

While fairly rare in Canada, Buy Here, Pay Here (BHPH) operations do exist. Rather than getting a loan from a bank, a BHPH dealership loans you the money for a vehicle directly. Since they are lending their own money, they virtually guarantee approvals. Be warned, though, they can set their own interest rates and terms. In many cases, the dealer makes more off of the interest than the vehicle you buy. There's a lot of potential for abuse and we don’t recommend going the BHPH route.

We’re always happy to answer questions and share our financial advice with the good people of Corner Brook and all of Newfoundland. We’d love to hear from you so feel free to reach out anytime.