In terms of lifetime investments, buying a car ranks second only to buying a house. That’s why it’s important to check out all available payment options before signing up for such a major financial commitment.
While hunting for your dream wheels can be fun, working out how to pay for them can be a daunting process. A poor decision may have long-term implications that can tight-strap your budget, eat into your savings, and even tank your credit score. So here are some top tips from the experts at Canada Drives on how to navigate smoothly through the car-buying process, avoiding pitfalls and making smart choices.
What Do I Need to Get a Car Loan in Canada?
Application approval may take anywhere from a few hours to a couple of weeks, depending on the institution. You must complete the car loan application form in full (in either hardcopy or on-line), and provide the lender with details (make, model and year) of the vehicle, together with requested financial and personal information. Although lenders in Canada each have their own parameters, almost all of them require the following documentation:
- official photo ID confirming you are of age;
- written consent to a credit rating check;
- proof of income;
- proof of residency;
- other debt obligations and financial commitments;
- proof of car insurance (as surety for the loan).
Can I Afford a Car Loan in Canada?
There’s a hidden benefit in taking out an auto loan in Canada: by making more cash available, it allows you to buy a better or newer car. And that means more efficient fuel consumption, with lower maintenance costs, fewer repairs, and more affordable insurance premiums. The resale value may be higher as well, as older car prices tend to plateau All these savings can be offset against monthly loan repayments, thus bringing down the overall purchase cost of your car. When calculating your forecast monthly outlays, don’t forget to add annual road taxes, licensing fees and parking charges to your repayments.
Where Do I Find a Car Loan in Canada?
In the fairly recent past, the only lenders offering to finance vehicle purchases in Canada were dealerships and banks. Although trustworthy and convenient, both these channels require good credit scores, with reams of paperwork to complete and several in-person appointments. Additional fees may also ratchet up the end-price of each deal.
A more modern option, online vehicle retailers – like Canada Drives – allow buyers to browse, buy, and finance their automobiles completely online, with no face-to-face contact needed. Listing hundreds of automobiles, virtual showrooms replace expensive bricks-and-mortar premises, with no need for costly billboards or on-site sales staff, this internet-only business model keeps outlays low. These savings are passed on to customers through lower prices and faster closings, streamlined through pre-approved car loans in Canada.
Why Do I Need a Pre-Approved Car Loan in Canada?
Completing a quick preapproval loan application tells you exactly how much you will be able to afford, and without lowering your credit score. By helping you budget more accurately, you save time by browsing only vehicles that fall within your repayment possibilities, with no risk of overextending your financial capacities.
For added confidence, you can calculate your monthly repayments through the Canada Drives Car Loan Calculator. All you need is the amount and duration of the car loan, and your credit score. The amount of interest paid on an auto loan in Canada is heavily dependent on the vehicle in question and the borrower’s credit score, as well as the lender’s prime rate. Although the value of each monthly instalment remains unchanged, the proportional breakdown between interest and repayment shifts constantly, with more interest settled during the early months, and much of the principal paid back only towards the end of the term.
Remember: Prompt payments (preferably through a bank order) keep your credit score high – and that’s a valuable lifetime asset.