We recommend people financing a car loan as the ideal option in many situations. They aren’t suitable for everyone and every circumstance though. That’s what today’s post is all about. Should you finance a car loan in Canada?
Our car loan team have put together a series of pros and cons of car loans so you can decide whether it’s the right option for you or not. Then, when you’re ready, contact us to discuss your needs in more detail.
The Pros of Financing a Car Loan
There are several reasons why a car loan may be perfect for your needs:
They are usually cheaper than dealer finance: Unless there’s a special offer or 0% finance deals, a typical car loan will be cheaper than dealer finance options. Much will depend on your credit score and the rate you’re offered but it’s usually the case.
Easy to arrange: Prepare your paperwork, check your credit score, get preapproved, find the car, apply for the loan. It sounds straightforward because it is. As long as you can prove your income and can afford the loan, they are very easy to get!
Buy new or used: Dealership finance is typically only for new cars. A car loan can be used for either. If you prefer to buy a nicer car for less money, buying used is a very sensible way to do that.
Flexible terms: While car loans are usually a fixed term deal, you can usually set those terms yourself. Shorter terms mean higher monthly payments but less interest over the term. Longer term car loans mean lower monthly payments but more interest over the term.
The Cons of Car Loan Financing
It isn’t all good news though, there are downsides to car loans:
You need a good credit score to access decent rates: We can access car loans regardless of your credit score but you will need a good score to get a good rate. The higher the score, the lower the rate.
No manufacturer or dealer incentives: Many manufacturers and dealerships offer incentives if you use their finance. The deals range but can include cash back or other benefits. You don’t get that with a car loan.
Depreciating asset: Buying a car means paying for a depreciating asset. That means the car will lose value over time so it will be worth less than when you bought it. This is the same for any car purchase but it’s something to be aware of.
Leasing may be cheaper: If you’re worried about making the monthly payments, leasing may be a cheaper option. The downside with leasing is you’re renting rather than buying.
There is no ‘perfect’ solution to whether you should finance a car in Canada compared to other ways of car ownership. There is only the solution that’s perfect for you or someone in your situation. Car loans do make sense for the majority of buyers but everyone is unique, with their own unique situation. If you would like to discuss your options, contact our team and we would be happy to help!
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 get approved for a car loan today!