There are a number of options available to customers looking to secure used car financing in Canada. Two primary choices are available: either finance your used vehicle through a car dealership, or obtain financing through a bank.
Whether you choose on-the-spot financing through a used car dealership, or apply for a used car loan through your bank, there are a few facts that you should know to make an an informed decision.
Most used car dealerships will have an online car credit calculator to help you estimate your payments on a vehicle. Knowing your rate can help you choose a vehicle that fits your budget.
When financing a vehicle, most major lending institutions recommend that you don't exceed 15% of your gross monthly income for car loan payments. For example, if you have a monthly gross income of $2,000 then your car payment should be no more than $300.
Determine Your Down Payment In order to maximize your budget, a larger down payment will reduce the monthly car financing payment. It also improves your chance of being approved for financing with bad credit or poor credit.
When you walk into a dealership it helps to know your credit score beforehand so you have an idea of whether you will be able to qualify for low percent or 0% financing, or if you should be considering a bad credit car loan.
There are two major credit-reporting agencies in Canada that can provide you with a detailed report that includes your credit score:
There are a number of reasons to choose to finance your vehicle through a used car dealership. In many cases, interest rates offered by a dealership can be better than those offered by a bank (although this is not always the case).
A dealership may also be able to arrange financing for you through a bank, although there may or may not be an extra charge for this service.
Pros to Car Dealership Financing
Cons to Car Dealership Financing
Financing through your bank offers a no-pressure atmosphere, and in some cases your bank will give you advice like telling you if you are paying too much for a car. And if a car dealership charges you a fee to arrange financing through your bank, that can be a good reason to deal with the bank yourself.
Pros to Bank Financing
Cons to Bank Financing