Financing a brand new car is not something that everyone in Canada can afford. As a result, it is customary for many drivers to purchase their automobiles from dealerships that sell used cars. They’ll have transportation from point A to point B with a used automobile, but they won’t have to worry about the wear and tear that a Canadian car endures or the price tag that comes with it.

That being said, when we talk about secondhand vehicles, we usually imply something a little more expensive than your grandmother’s 1999 Corolla. When a used car requires consumer finance to be acquired, it is usually because the vehicle is only a few years old and has low mileage.

Despite the cheaper initial cost than a new vehicle, there are a few other aspects to consider before putting pen to paper. Don’t worry, we have a few ideas for you if you’re looking for a used vehicle in Canada.

Strictly speaking, the majority of Canadians obtain a loan to finance a used car in one of two ways: through a bank or through a car dealership directly. Again, we’re assuming that you’re not looking to buy a $1,000 fixer-upper from a private seller on Kijiji, but rather a lightly used automobile that’s less than ten years old and has less than 100,000 kilometers on the odometer. Each financing option has advantages and disadvantages, and selecting the best choice for you can be influenced by a variety of factors.

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Actually, as with many sorts of loans, one of the most important criteria determining your likelihood of approval will be the state of your credit. Your credit score might mean the difference between being approved or denied for various credit and loan products. And, in the case of the first financing option, it could mean the difference between receiving your used automobile or not.

Financing through a Bank

The first choice for financing a used car is to seek a loan from a bank, which is as near to home as you can get. While you may be considering sticking with your existing bank, keep in mind that different banks will offer different rates, so it may be beneficial to browse around a bit before making your decision. Even if your bank does not provide a decent rate for a used automobile loan, you can always obtain financing from a different banking institution or credit union.

Pros

• One of the major benefits of choosing a bank for your used car loan is that if you’ve been there for several years, you’ll likely have established a good relationship with them. You can go there anytime during business hours, discuss the situation with a financial advisor and get better advice than a car salesman may give you.
• Your bank will be a bit more reasonable during the payment process. Let’s say you’ve missed a couple of payments. True, this is certainly not a good practice to keep up, since missed payments will damage your credit score and both banks and dealerships can seize your car if you default for too long. However, your bank will probably be more lenient if you should miss a payment or two, especially if you’ve had a good record with them otherwise. They’ll likely charge you a penalty fee, but won’t immediately send a debt collector after you.
• Most banks are also open to negotiating the terms of your payment period. They’ll want to keep you on as a client, so if you can’t afford the monthly payments you have now, you should be able to negotiate a lower payment and draw out the term of your loan for a while longer. And vice versa, if you want to accelerate your payments by switching them to bi-weekly instead of monthly, or raise the amount you’re paying so that your term is shorter, your bank shouldn’t have a problem.

Through a Dealership

The second option is to finance your used car directly from the dealership. Potential borrowers can stroll in, look around for automobiles, do a test drive, sign some paperwork, and walk out with the keys before the end of the day. However, just like banks, dealership financing has advantages and disadvantages. So, before you rush to the nearest parking lot with an inflatable tube-man waving in front of you, think about what’s best for your financial condition.

Pros

• The most significant advantage of in-house dealership financing is, of course, the convenience factor. As we mentioned above, the application and approval process will be less time consuming, allowing you to find a car and buy it almost immediately. You won’t have to find a car, then go to the bank and wait for them to approve or reject you.
• Once again, car dealerships are businesses and they want to sell their products. While not all dealerships will necessarily offer better interest rates than the common banking institution right off the bat, they will likely be open to negotiating a more reasonable rate in order to close the deal. They may even throw in some bonuses such as a longer warranty or other upgrades to sweeten the deal.
• Since they’re trying to move their inventory, dealerships are also more inclined than banks to finance used cars for drivers with bad credit. Even if you’ve gone through a recent bankruptcy, you shouldn’t have as hard of a time getting dealership financing as you would getting financing through a bank.

Between the two used automobile finance alternatives, it can be difficult to provide a clear answer to a question that so many drivers have. Each option has advantages and disadvantages, and everyone has a preference for how they want to pay off their loans. The decision is entirely dependent on your personal financial circumstances.

If your credit score is less than stellar, you may have an easier time obtaining financing through a dealership. If your credit is good and your income is steady, your bank might give you a decent bargain. However, whatever “good deals” are offered by banks or car dealerships may simply be the most convincing salesperson’s convincing skills.

If you’re looking to finance a car of any kind, it’s critical that you discuss the issue thoroughly, read the tiny print, and understand what you’re getting yourself into. An automobile is a major responsibility, regardless of its condition. It’s a long-term investment that can and will cost you a lot of money. If your payment period is not correctly managed, you may end up paying twice as much as the automobile is truly worth, or perhaps more given how quickly a car’s value depreciates.