Buying a new vehicle is a very exciting experience, especially if it’s your first time. Outside of buying a home, it is usually the biggest purchase most individuals will make.
Naturally, it can feel a bit stressful, but it doesn’t have to be. Of course, you want to ensure you choose the right vehicle, get a good price for it and are able to fund your purchase in the most affordable way, but there are plenty of options out there to help make the process simple and painless.
If you’re like most people, buying a new car in cash isn’t feasible. So, what are your options?
Some people choose to lease a car or truck, which means they are essentially renting it for a predetermined period of time and will be given the option to purchase it at the end of the lease. However, most Canadians choose to finance the full purchase of a vehicle, so they can own it outright.
If you are looking to buy a new vehicle but don’t have the means to pay one lump sum, auto financing is a great solution. Let’s take a look at what auto financing entails and the best options available to you.
What is auto financing?
Auto financing, also known as car financing, refers to the financial options available for purchasing a car, truck or SUV. If you decide you’d like to finance a vehicle, you can borrow money directly from a bank or credit union, have the dealer arrange the loan for you or go through an online loans platform – which has become an increasingly popular choice among Canadians.
When you borrow money directly from a financial institute, you will be making payments back to a lender over an agreed period, with interest plus a finance charge. Once you enter into a contract with a dealership to purchase a car, you use the loan from the lender to pay for it.
One benefit of direct lending is being able to comparison shop - shopping around at several lenders and learning about their loan terms before you decide to buy a specific car. Another advantage is that you get your credit terms in advance, including the annual percentage rate (APR), length of term and maximum amount. It’s important to note that this type of loan is subject to approval, meaning that if you don’t have a good credit score, you may be rejected.
If you opt for dealership financing, the dealer will make loan arrangements for you with a lender and you will be able to apply for and receive a loan directly through the dealership. This form of in-house financing is particularly beneficial for those who don’t have a great credit score, as it allows you to get an auto loan in instances where they otherwise would not have been able to. What’s more, when you obtain financing through a dealership, they can arrange it through the financing division of a manufacturer, financial institutions or independent finance companies, such as those that specialize in providing car financing – giving you more options to choose from.
Financing your vehicle through a dealership also offers you more convenience, as everything is taken care of you in one place and is a lot faster than going through a direct lender.
If you decide to use an online financing platform to purchase your new vehicle, you will fill out an application and the company will use your information to match you with a certified dealer partner who will discuss your vehicle options and the amount that you are able to dedicate towards your monthly payments. This popular and convenient option for auto financing is particularly attractive to those with less-than-favourable credit scores.
The advantages of auto financing
There are a ton of benefits to financing a vehicle opposed to leasing one. First off, when you finance, you are paying towards the ownership of the vehicle and building equity on your purchase. Financing also means that you won’t have to make any more payments after the loan is paid off.
Another advantage of financing instead of leasing is you have the power to sell your vehicle or trade it in for a newer model. You also have the option to customize the appearance of your vehicle and even increase its value through upgrades.
How to get auto financing
As mentioned, there are numerous ways to get auto financing to purchase your next vehicle. You can visit various financial institutions and compare their interest rates to decide which is best, visit car dealerships and have a dealer arrange the loan for you or use an online financing platform like Canada Drives®.
Canada Drives has partnered with over 350 car dealers across Canada who offer special financing programs. Through their extensive network they can easily match you with a local dealership in your area who can help secure financing for you, regardless of your credit history.
Interested in obtaining auto financing through Canada Drives? Get started by completing this application in minutes and get approved in as little as a few hours.