Are you interested in loaning a car in Kitchener-Waterloo? The feeling of parking a new car on your driveway is supposed to be an enjoyable one. That said, whether if it’s new or used, there are some key rules that you should adhere to so that you can avoid regretting your decisions down the line.
1. Choose a Ride That Suits Your Need and Ability
One of the common mistakes often made by eager Ontario buyers is failing to accurately apprehend their financial ability. It’s tempting to go for that premium, luxury model that you have longed for, and when you realize that you can actually purchase one, that notion alone can be blinding. It’s important to recognize that being able to purchase something doesn’t mean you can afford it.
While it may be hard to come to terms to accept that you simply lack the capability to pay for something, it’s important to not spend every single penny every month in amortization. Always ensure that you have your monthly expenses and allowance clearly defined before you shop for a car so that you know how much you can actually spend. A general rule of thumb is 20% of your annual income can be allocated to an auto loan. That includes everything needed for the car to stay on the road, insurance, taxes, interest, etc. Utilizing loan calculators here can be invaluable.
2. Picking a Dealership Is as important as the Purchase itself
Choosing where you want to make the deal isn’t all about the best interest rates. There are mandated laws that all lenders must abide by. This is consumer protection that protects the buyers and prevents car dealers taking advantage of uninformed customers. Sticking to a reputable or well-known used car dealership can avert potential nasty surprises from rearing. The Internet is useful for researching the laws and further understanding your local dealerships’ reputation.
3. Scrutinize Your Dealership of Choice
When you know which dealership you’d like to give your business to, the next thing you should do is research the lenders, and their connection to the dealership. As trustworthy as the dealership may seem, the lenders are the one providing the funds to bring your car home. It’s best that you can understand whether if the lender is reputable, plus whether if the dealership and lender has a good relationship. If it’s a credit union or the dealer’s own institution, and they often introduce incentives or special deals cooperating with the dealership, that’s a good indication.
4. Reputable Lenders Can Help You
Not only can a reputable car loan lender and dealership provide you with the ideal interest rate for your car loan, but if you have a poor credit score, it can be beneficial in improving your credit outlook. While you may be offered a subprime lender, that’s a chance to really restore your credit score.
Additionally, all the lender really cares about is whether if you pay your debt punctually every month. If you’re late on a payment, just call up your lender and clarify that you’ll make the payment as soon as you’re able. If it’s reasonable, and the lender is understanding, just pay your account current and it’ll be fine. This can avoid potential inaccuracies in your credit report.
5. Understand Financing Options and Application Process
There are actually a few methods to which you can approach a loan. One is dealership financing, these may potentially net you a special financing deal which can reduce the interest rate drastically. Generally, the loan application is evaluated electronically through a credit report analysis, which lenders look at then make an offer.
Second is direct loans, which are loan offers made directly towards the borrower via either a bank or credit institution. Without dealership incentives, this is generally where you can find a better deal, especially with credit unions.
The process can be pretty simple. The most important thing is to make sure your documents are readily available, information like driver’s license, proof of residence, proof of income, credit report etc. The sooner you provide these, the quicker the process will go. Then, if you have a solid credit score, you should receive a pre-approval letter, in which you can use to ‘buy’ your car. This also tells the dealership you’ve already got a loan, so you don’t need financing. The pre-approval loan is generally higher, and you can only spend within this pre-determined amount.
Finally, when you’ve decided on your ride, and the loan is approved, you can then finally sign the legal agreements. Read these carefully, even if it takes an hour. The keys will then be handed over to you.
Hopefully, this guide will provide you with a bit of insight into what to do when loaning a car. If you are interested in something, be sure to browse our inventory, and if you have questions, don’t fret to call us up, or come on down.