When we think about getting a car loan, most of us probably associate this with buying a brand new car. However, many car purchases across Canada are for used vehicles and loans are available for these cars too.
There are many important considerations to make when thinking about getting vehicle financing. Some of these may apply regardless of whether the car you are buying is new or used. However, there are some that are more specific to purchasing a previously-owned vehicle. Here are some steps to take before you look to obtain car financing on a used car.
3 Steps to Getting a Loan for a Used Car
1) Assessing your Budget
Even before you set foot in a car dealership or pursue an alternative credit source, you will want to take a closer look at how much you will need to budget in order to afford your vehicle. Like buying a new car, you need to take into account the cost of not only the down payment, but also the monthly loan payments and even the insurance, repairs and so on. If you are buying a used car, it is still important to include the down payment in your budgeting plan, just as you would when buying a new vehicle.
2) Understanding your Budget
After you have developed your budgeting plan, you can take it a step further and pinpoint how your budget numbers will realistically affect your ability to pay for the car loan. For example, how many months will it take you to pay for the car, how many months do you want to have it paid off by and how much can you afford. The duration of the loan is a key factor in your ability to properly pay back the loan.
3) Applying for Loans
When it comes time to actually apply for the used car loan, you will have some more decisions to consider. Deciding where to apply for a loan can seem like a daunting process, especially if you don’t know where to look. Many people solely look to car dealerships and financial institutions for loans – however these can be somewhat limiting with regards to the range of loan features themselves, as well as who will can gain approval.
Alternatively, you can use a service like Canada Drives, which helps individuals from diverse financial backgrounds secure loans. Drivers with poor credit, who are likely not to be secure auto loans through traditional lenders, find they are granted approval with the quality assistance that Canada Drives offers. In fact, the company is able to seek out a range of options and match a client with the most suitable partner to see them through to approval.
What to Watch out for When Buying a Used Car
If you already have a vehicle in mind and are aware of what it costs, you will be able to identify how much to budget and be ahead of the game a bit. During this step, you will want to also keep in mind how much you can actually afford and not choose a vehicle that is valued too high. Failure to make payments regularly and on time can be potentially dangerous to your credit rating and finances in general.
It is also important to take note of the book (or listed) value of the used vehicle you are considering. This is critical as you do not want to end up paying more for the car than you have to. The internet is a great source of information, helping new and used car buyers gain a greater understanding of the value of a specific car of interest. The main information you will need to know to help determine this value includes: the vehicle’s make, model, year, mileage, and the overall condition of the vehicle itself.
Certification for Pollution Control (some provinces)
When buying a used car in Canada, both parties (the seller and the buyer) are required by law to complete and sign a form that states that the vehicle has passed the Certification for Pollution Control standards. You should receive a copy of this form for your own records before you finalize any deal or financial arrangements.
Private vs. Dealer
You also need to consider if you’ll buy a car from a dealership or one from a private seller. There can be advantages and disadvantages to both approaches, and you should be aware of these before moving forward.
A credible dealership is more likely to have done a proper vehicle inspection to assess the condition of the car, so there is an issue of safety to consider. If it turns out the car has damages that were unaware of, if you have bought the car from a dealer, you can go back to them and have them address the situation. In the case of a private sale, this may not be possible.
If buying privately, you will want to make sure the seller has proper documentation such as vehicle licensing and permits. With a private seller, you may get a better price on the car – however it is sometimes important to enter into this process with a bit of caution as well.
If you are in the market for a used car and require a loan, you can contact Canada Drives and take advantage of their flexibility, knowledge, and commitment to helping link Canadians to the right partner for their needs.