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Author: CarFax Canada - www.driving.ca
Thinking about financing a used car? If so, you likely have some questions. How does it work? Am I eligible? What's the best way to finance a used car? Is it better than leasing? This comprehensive guide will take you all the way down the road of used car finance so you can decide if it's right for you.
How does financing a used car work?
Financing a used car means getting a loan to pay for the vehicle so you don't have to come up with the money all at once. There are a few different ways you can do this -- either through a dealership, a bank/credit union or online -- which will explained more later.
How can I check my own credit score?
If you've ever gotten a loan or applied for a credit card, you have a credit score and it affects your ability to get a loan for a vehicle and the rate you receive. The higher the score, the better your chances of getting a loan at a good rate as you have a proven track record of paying things back in a timely manner. The lower the score, the more challenging it can be (although not impossible). To check yours, visit Equifax Canada or TransUnion Canada.
How much should I spend on financing a used car per month?
When it comes to smart auto financing, a good rule is the 20/4/10 equation. According to this way of thinking, you should put at least 20 per cent towards the down payment, finance for four years and keep your monthly payments around 10 per cent of your gross monthly income. Some agreements may be a bit longer and that can be OK in some cases -- just make sure it works for you. Don't forget to keep in mind the total operating costs of the car so you can make sure it all works within your budget.
How do I find the best interest rate?
There are two options when it comes to interest rates: fixed or variable rates. With a fixed finance rate, the interest amount doesn't change for any reason over the duration of the loan. The downside? If the market rate decreases, you still have to pay the rate you locked in at. The upside? If the market rate increases, your payments stay at the lower rate you locked in at. Variable rates offer more flexibility but can add more risk, as fluctuations in the market could cause rates to increase or decrease -- it's a bit of a gamble either way.
A helpful tip: CPOs (certified pre-owned vehicles) typically come with better interest rates, plus you know it's a great car because these vehicles undergo rigorous safety inspections, fit certain age and mileage requirements, and typically come with extended warranties.
What do I need to finance a used car?
When financing a used car, your greatest ally is knowledge. Make sure you have all your ducks in a row by gathering the documents you'll need for the journey, including proof of address and proof of income. Then, do your homework -- know your credit score before you apply, research lenders, compare different used car financing options, you can even apply for a used car loan before you start looking (more on that later).
Continue reading HERE!
Source: https://driving.ca/vehicle-types/used-vehicles/how-to-finance-a-used-car
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