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Summer in Canada means it’s time to hit the road — and shop around for new cars.
Last year, over half of all car purchases in Canada were made using finance payments. But if the idea of a hefty monthly payment seems intimidating, don’t sweat it. We offer some tips below to help you along your car-buying journey.
The fast lane to getting your next vehicle
We know that auto loans can be costly but that doesn’t mean you can’t find the car you want at a price that fits your budget. We have some tips to help you along the way.
Remember: You’re not alone on this journey
There are plenty of resources out there for first-time buyers. For instance, the Royal Bank of Canada has a checklist of things to consider when making your first car purchase, as does Carfax.
Get real about your budget — and your credit
When it comes to auto loans, it pays to know your budget and your credit health.
- Calculate your car payments based on your budget: Can you afford the average monthly auto payment of $739? Tools like the RBC’s loan payment calculator or the CIBC’s car loan calculator can help give you a rough idea about what your monthly car payments could be so you can adjust your budget accordingly.
Know the health of your credit: It’s important to have an idea of your credit health when you start shopping for a vehicle because having poor credit could increase your borrowing costs. If you can afford to wait a bit to work on improving your credit health before buying a car, it might be worth it.
The drive is as important as the destination: Don’t settle for the first offer
Once you’ve made up your mind to get a new vehicle, it can be tempting to rush to the dealer and buy the first car you see. But before you commit to adding a payment that could be hundreds of dollars a month, it’s a good idea to shop around for the best auto loan price and vehicle price.
- At the lender: Your first step in the car-buying process should be to shop around for an affordable auto loan rate. You don’t want to pay more in interest over the life of the loan than you have to, so it’s a good idea to check rates at multiple banks, credit unions and dealers.
Then, if you find a rate that you like, you may be able to apply for pre-approval so you don’t have to haggle over financing at the dealer. Make sure you have a disclosure statement from your lender so you’ll be able to clearly see the terms of your loan. Just keep in mind that getting preapproved doesn’t mean you’re automatically approved for the loan, and you might have to submit more information when you formally apply. Once you formally apply make sure you have a disclosure statement from your lender to confirm the terms of your loan.
- At the dealer: If you find an auto loan with terms you like, it’s time to check out your car options. Maybe that car you’re seeing at the dealer looks great. But should you really pay the asking price? Whether you’re looking at a new or used vehicle, you should know the fair price for the car before you start negotiating.
When it comes to used cars, checking a vehicle history report through a site like Carfax is key so you know if any damage to the car has been reported. If you run into any issues with the dealer, the Financial Consumer Agency of Canada has information that can help.