There has been a dramatic increase in the sheer number of companies that offer auto loans in Canada. These lenders are all trying to gain market share, so they are willing to offer competitive terms that let you save money financing car. While competition is healthy, you should take a few moments to better understand how automobile financing in Canada works.
This article will outline the easiest way you can save money financing a car in Canada, so you can rest easy knowing you made a great decision!
Vehicle Fair Market Value
The lender is going to provide an auto loan based on the current fair market value of the vehicle you want to buy. If you are buying a new car, then the MSRP is what the lender will use but if you are buying a used car, some variables come into play when determining the fair market value.
Some websites specialize in providing the current market price of used vehicles but the lender is not obligated to use those valuations. Your local used car dealership would be able to give you a professional opinion on what the used car is worth.
Qualifying for a competitively priced auto loan
Each lender specializes in a particular type of client, some focus on customers with pristine credit by offering the lowest interest rates. These customers typically go with one of the big 5 banks in Canada.
Some lenders target customers with slightly below prime credit (credit score 679 and below). If you fall into this category, you will be able to get rates that are still competitive. If you are not sure what your current credit score is, you can get that information online for free.
Lenders also want to know how much income the borrower receives on a monthly and yearly basis. A growing number of borrowers work more than one job or have sideline gigs. The way you verify this income is by showing bank statements that record all of the deposits from your various jobs.
Ability to service the loan
You may have great credit and income that can be verified but are you generating enough income to service the auto loan? Each lender will set its limits but the majority of mainstream lenders will not lend more than 40% of total debt to income.
Benefits of using a car dealership
A local car dealership can help you with not only finding a car that suits your needs and budget, they usually have a vast network of lenders who will provide you with financing. In theory, you could look online and may be able to find the lender but you will never be able to get the terms that your dealership can negotiate.
Every local dealership will claim to be the best, and each has its own particular set of strengths. The only effective way of assessing the suitability of these car dealerships is to perform your due diligence.
Start by looking at the comments that were left by people who dealt with the dealership in the past. Google reviews are great for gaining some insight into the overall customer service experience. Once you have located the car dealership that has the best reputation and cars you want to buy, it is time to schedule a test drive.
By sticking with the suggestions that were provided, you will be able to buy a car without the risk of paying more than necessary.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you save money finance a car today!
For any questions or concerns, please don’t hesitate to contact us here!