GET A CAR LOAN IN CANADA

Loan Options

If you’re looking to buy a new or used car in Canada, then you’ll need to be able to afford it. There are a number of ways to buy a car:

  • Pay for it entirely from money that you’ve saved up.
  • Get a car loan in Canada to pay for the entire amount.
  • Set up a monthly payment plan where you make monthly payments off the full amount until the car is fully paid for.

Each of the above methods has pros and cons, for example; to pay for a vehicle entirely from your savings requires you to begin saving a while ago to have enough put away to pay for the whole cost now. Whereas, loaning or doing monthly payments will see you paying more for the vehicle in the end because you’ll be paying monthly interest on the sum you’re effectively borrowing.

buying a vehicle

 

The benefit of monthly payments or a full vehicle loan, is that you don’t need the funds up front. This common method of purchasing a vehicle is preferred and used by many Canadians because of convenience and the ability to access a higher level of funds than can normally be afforded.

This is also relevant in terms of a person’s situation, because the requirement to get a new or used car may be a surprise, for example, if your current vehicle breaks down.

So, there are a number of ways to fund a new or used car and this helps most people be able to do just that. Be sure to do your research on the vehicle to ensure it’s what you need and don’t forget to do a vehicle history report check to ensure that it doesn’t have any previous issues that you’re unaware of.

Budgeting and Affordability

One of the key things to be sure of if loaning or doing monthly payments, is that you can afford the payments and interest. It can be very tempting to overcommit to get that shiny new car and not take into account your ability to pay the money back.

It’s always advisable to do a personal budget that includes the car payments and interest to help you see if the plan is viable for you. The last thing you want to do is not be able to afford the repayments, because this will see additional penalties added and may even result in the vehicle being repossessed and you still owing money on it.

car loan in canada

 

If you’re unsure of how to see if you can afford a new car, then there are various budgeting advice resources available for you to use.

Trade-In Your Existing Car

If you already have a vehicle which you’re looking to improve on then you can look to trade the car in on your new vehicle. This effectively reduces the amount you need to pay on the new car as the dealer will give you a price to take the vehicle from you in exchange for the new car and the balance of the money.

Car dealers who take trade-in vehicles will be looking to on sell the car so the price they’ll pay you or credit you, will be a low amount compared to you selling the second-hand car on the open market. However, trading a car in on a new one is a convenient way of doing it, because you don’t need to worry about tidying it up and marketing it for sale.

Making It Fit For You

What ever choice you make to fund your next vehicle, you can do so knowing that you do have a number of options to suit a range of people and their personal situation. The important thing, with every large purchase is to do your research, don’t over commit yourself and make sure that your purchasing method is going to work for you now and well into the future because large purchasing decisions don’t go away quickly.

Also, don’t forget that if you’re looking to buy a more expensive or different style of vehicle, for example a pick up truck, then the insurance cover on the vehicle will reflect the value. So, if you own a $10,000 second hand car and are moving to buy a $40,000 new car, the insurance will likely double in the premiums you need to pay, if not more. So, the best option is to get a quote for the insurance based off the new vehicles specifications and include that into your affordability calculations.

We hope that this article has given you some insight into what to think about if you’re considering getting a car loan in Canada.

 

Article written by Jim Known, Vehicle Advisor for Vehicle Check Canada, March 18th 2024

 

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