Regardless if you’re a first-time car buyer or simply looking to upgrade on your current vehicle, there are a couple of things to know before proceeding with this action.
To be more precise, we are going to talk about how to get a new car by specifically focusing on loans in beautiful Canada.
Car loan companies in Canada are the driving force of the industry, with nearly 55% of all purchases being financed for 84 months.
According to Complete Auto Loans, they’re many types of loans, and they are determined depending on the car type, whether it is new or old, whether you want to buy or lease one, etc.
It’s safe to say that there are a lot of options in Canada, and the financing you need depends on your personal finance.
So without further ado, let’s get straight into the types of lending.
• New Car Loan
Just as the name suggests, these are given by dealerships and car loan companies that cover the costs of the new vehicle. These come with fixed-terms, usually between one to five years.
• Used Car Loans
Similar to new car loans, companies and banks factor in the vehicle’s mileage and age. These loans look at the records of the previous owner to determine the interest rate and terms.
• Private-Party Car Loans
Lenders in Canada have a special option for those who are looking to buy a vehicle from a private seller, rather than a dealership. These loans come in the form of Private-Party Car Loans and they factor in multiple things such as the car’s age, mileage, driving condition, etc.
• Lease Buyouts
As suggested by canadadrives.ca, lease buyouts allow you to pay for the fee of the leased car at the end of the lease. This way you get to completely purchase the vehicle.
• Auto Refinancing
Auto refinancing refers to the act of trading your existing loan in order to reduce your monthly payment or to pay off it quickly.
• Buy-Here-Pay-Here Loans
The last type of loans that companies give out is meant for people with poor credit scores to avoid the harsh pulls on their credit report. These are done by financing the car directly from the dealership but usually, come with very high-interest rates as well as hidden fees and add-ons.
What Are The Main Factors That Determine A Car Loan?
It all comes down to three things when determining how much you’re going to pay for a car loan.
• Interest Rate
The interest rate is a percentage of the loan balance charged by a bank or a lender that is being added to the principal amount you owe for the car. Interest rates in Canada typically start at 4.9% but can be as high as 20% in some cases of poor credit score.
Fees are charged on top of the loaned sum and you have to pay them if you want the loan to continue. The rates are usually paid monthly and it is a percentage of the annual fees and interest rate.
• Loan Term
The loan term is the amount of time the lender gives you to pay off what you borrowed in its entirety. A shorter period will result in higher monthly payments, but a lower loan cost while the longer car loan will result in lower monthly payments but a higher cost because you pay more in interest.