Car loans for nonresidents in Canada

Are you a temporary resident in Canada and in need of a car? The good news is that some lenders are willing to offer car loans for temporary residents – but you may be subject to more stringent eligibility requirements than other borrowers.

Can I get a car loan as a temporary resident or with a work permit?

Yes, car loans for temporary residents are essentially the same as any other car loan, except that fewer lenders offer them and you may need to meet additional eligibility requirements, including how long you’ve been in Canada, how long you intend to stay and your employment status.

Be sure to check with your lender to find out exactly what status and documents you must have in order to apply for a loan. Keep these 5 factors in mind when looking for a car loan with a work permit.

1. Visa types accepted by car loan providers

Some lenders will only extend credit to nonresidents holding certain types of visas. Borrowers with student visas or permanent resident status will likely have a greater chance of success than someone on a provisional or seasonal work visa. You’re odds of car loan approval are even better if you have an employer-sponsored visa.

While requirements may vary between lenders, some lenders may limit auto financing to temporary residents with one of the following Visas:

• Permanent Resident Card IMM5688 or IMM5292
• Work permit IMM1102 or IMM1442
• Study permit IMM1208 or IMM1442

2. How long your Visa is valid for

Some lenders may rule you out if you’re on a short-term temporary visa such as a seasonal work visa so your best bet is to apply if you have a work permit that extends for at least a year or two. Your loan will typically only extend for as long as your work permit and passport are valid.

Ideally, you’ll have lived in Canada for at least three months, been gainfully employed and earning a steady income. If your passport is about to expire, or your work visa doesn’t extend beyond half a year, you may have trouble getting approved. You should use your work permit and employment status to show lenders you are here to stay.

3. Credit history as a temporary resident

As a nonresident, you likely have little or no credit history in Canada. Since lenders won’t consider your overseas credit history, they may place more emphasis on your down payment, income and employment status to help determine your ability to repay a loan.

4. Visa breaches

Many visas have strict limitations on the number of jobs you can hold or hours you can work in a week. While it’s important to maximize your income before applying for a car loan, lenders likely won’t extend you credit if you’ve breached the terms of your visa.

5. Car loan term

Most car loan providers offer terms from 1-5 years. However, you likely won’t be offered a loan term that extends more than 3 months before your visa expires. Most lenders only consider your current visa and won’t rely on pending visa applications or extensions — no matter how likely you are to be approved.

Compare car loans for temporary residents

Applying for a car loan through a broker may be your best chance, as a broker can match you with a lender willing to offer loans to temporary residents. As with all car loans, eligibility criteria vary by lender and may include minimum income and credit requirements.

How do car loans for temporary residents work?

In general, you borrow money needed to purchase a car from a bank, credit union or online lender and enter into a contract to make monthly repayments over a set number of years. The loan is backed by the car you’re purchasing, which means the lender can repossess your car should you fail to make your payments. While you can get car loans for temporary residents, it’s worth looking into getting a personal loan to buy your vehicle.

Increase your chances of approval for car financing with a work permit in Canada

Car loans for nonresidents are considered a high-risk endeavor for lenders. Aside from meeting the eligibility requirements, here are some tips to improve your chances of approval:

• Don't submit too many applications at once

  If you’re working to build your credit in Canada and want to apply online, call and ask the lender if they’re willing to lend to nonresidents before submitting an application, or apply with the options above. Your credit score drops a bit each time a lender checks your credit, so you’re better off not applying to lenders you don’t have a chance with.

• Make a cash down payment

  The greater the down payment you can offer, the greater your chances of success. Ordinarily, down payments are 15-20% of the vehicle’s value, so you should try to aim for an even larger down payment than that.

• Build up your savings

  If you can prove that your down payment is the result of your savings efforts while working in Canada, this will show lenders that you’re serious about applying and can effectively manage your finances.

• Prove your employment is stable

  Lenders need to be satisfied that your employment is stable and that your income is regular. A lower, steady income can be more favorable than intermittent or seasonal income — even if the latter is higher. You may need to provide both your tax documents and your employment history for the past several years.

• Apply with a cosigner

  If you have a friend or family member that’s a Canadian citizen and willing to cosign your loan, you’ll have an easier time finding a lender. Just make sure you only borrow what you can afford to pay back — your cosigner’s on the hook for repayments should you default on the loan.

• Open a Canadian bank account

  Most lenders want to see that you have a Canadian bank account that you use to deposit your paycheques on a regular basis. Be prepared to provide bank statements for at least the last 3-6 months. Find out more about opening a bank account in Canada.

How to apply for car loans for temporary residents?

Many lenders allow applications for car loans to be completed online, making it a simple and easy process. On the other hand, since there are more stringent requirements for nonresidents, an online application may be more difficult. Lenders do have a certain amount of leeway when it comes to deciding whether to extend credit to nonresidents.

That’s why an in-person appointment can give you the opportunity to state your case and show that you’re a good candidate. Make an appointment to speak with a car loan officer at your chosen bank or credit union, or over the phone with an online lender.

You should always double check with your lender to see what documents you should bring with you to fill out your loan application, but the following information is typically required:

• Personal identification

  A valid, non-expired passport or driver’s license from your home country should be sufficient. Your I.D. should have your name, date of birth and photo.

• Proof of employment

  Details on who you work for over the last several years and how long you’ve worked for them may be required. Include business contact information for your employer and immediate manager or supervisor.

• Proof of income

  Bring pay stubs from the past 3-6 months, bank statement showing your income and/or tax documents, such as Canadian Notices of Assessments, from the past 2-3 years. If you’re a contract worker, you may also need to get a letter from your current employer confirming how long you’ve been employed, the stability of your employment for the foreseeable future and how much you’re earning.

• Other financial details

  You should be ready to report your debts including student loans, credit card debt and anything else that you owe. Also be prepared to report savings, investments and any other assets you have in your name.

• Proof of residence

  A bank statement, utility bill, credit card bill, phone bill or similar document with your name and address on it is often sufficient.

• Vehicle information

  This includes the make, model and year of the car you want to get as well as your dealership’s address and contact information. If you have not yet picked a car, you may be able to submit a preliminary loan application to get pre-approved for a certain loan amount. Usually, you have 60 days after getting pre-approved to find a car within your price range and make a purchase.

• Proof of insurance

  If you have a vehicle selected, you may need to show proof of insurance to your lender. Lenders often require a more comprehensive level of coverage that what is required by law in order to ensure that you will remain in a position to repay your loan even if there has been an accident and you suddenly have unexpected expenses to pay for.

How do I know if a car is good quality and fairly priced?

Never make a hasty buying decision or let a salesperson pressure you into making a choice. You can look up the Manufacturer’s Suggested Retail Price (MSRP) of a vehicle to find out what the auto manufacturer who made the vehicle says it’s worth. Use this as a negotiating tool with your dealership to make sure you’re not paying an excessive price.

You can also get pre-approved for a car loan amount from multiple lenders and then use these amounts to negotiate with your preferred dealer for a better price. After all, why would they want the interest payments you’ll be making on your car loan to go to someone else?

If you’re buying a used car, ALWAYS get a vehicle history report before signing off on the purchase.

Vehicle history reports can be obtained from reliable companies like CARFAX Canada and show the car’s maintenance history, any accidents involving the car and any current or prior claims on the car’s ownership. You can also run a a free VIN verify check on the Insurance Bureau of Canada’s website to see if the car has been reported as non-repairable due to flood damage.

The Canadian Black Book or the Kelley Blue Book (for vehicles bought in the U.S.) are great resources for checking the value of a car so that you can feel more confident about the deal you’re getting.

Bottom line

Getting a car loan as a nonresident can be difficult, but it definitely is possible. Take the time to call banks, credit unions and online lenders before applying to make sure they have options to provide you with financing. And increase your chances of approval by saving up for a sizeable down payment or by applying with a cosigner.

To learn more about how car loans work and compare lenders, check out our guide.

Compare car financing options for temporary residents

Frequently asked questions about car loans for temporary residents

• Can you buy a car without a license in Canada?

  While you can technically buy a car without having a driver's license, you won't be able to drive the car without a license. You'll have to register your car with the province you're living in. Doing so requires that you have insurance on the car, and in order to have insurance, you usually must have a driver's license. Rules may vary across Canada, however, so check with your provincial or territorial ministry of transportation to find out for sure.

• Can you finance a car without a license in Canada?

  It depends on the lender, but generally yes, it is possible to finance a car without a license in Canada. People typically only provide a license during the financing application process as a proof of ID. But as long as you have some valid, government ID – like a passport or provincial ID card – with your photo, proof of residence and birthday, you should be able to apply with some lenders. However, other lenders require proof of insurance, and you'll need a license to take out auto insurance.

• Can the bank give a nonresident a car loan in Canada

  Yes, many banks in Canada offer newcomers to Canada programs that may apply to nonresidents. These programs are typically even available to people with no credit history. Check with your bank to see what auto financing options you may qualify for.

• Can I get a car loan for a used car under $10,000?

  Possibly, however, many car loan providers have minimum borrowing amounts as well as limits to the age and mileage of used cars that are approved for financing. However, you could also consider taking out an unsecured personal loan in Canada, or even in your home country, and then transferring the money to yourself.

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