Used Car Financing FAQs | Ottawa
Used Car Financing FAQs | Ottawa
Posted on November 25, 2021
Not many people shopping for a new or used car can pay for a vehicle with cash. Even if they can, it might not make financial sense to do so. While buying a new vs used car is an entire debate, buying used offers many benefits to buyers, including lower price tags and less loss to depreciation.
Many financial institutions as well as car dealerships offer used car financing. Here are some frequently asked questions (FAQs) that should be considered before stepping foot into a dealership and requesting used car financing in Ottawa and across Canada.
What Should I Know Before I Apply?
You should know your credit score and what is in your credit history before you apply for used car financing. Your credit score will allow you to better estimate the interest rate and loan term (higher scores get lower rates).
Is Applying for Financing Easy?
Applying for car financing in Ottawa is incredibly easy. Most dealerships have a financing application on their website that buyers can even fill out before arriving at the dealership. However, the questions asked in the application are easily answered in five minutes at the dealership as well.
What are Used Car Financing Interest Rates?
Used car financing can have low or high interest rates depending on the financial institution and your credit score. In general, rates will be a tad higher for used cars compared to new cars. In addition, lower rates will be attached to shorter term loans and higher rates to longer term loans. For example, loans of one, two, or three years in length might have a 2.49% interest rate while loans of four, five, and six years in length might see 3.49% instead.
What are Used Car Financing Loan Terms?
Many financial institutions in Canada offer used car financing on a biweekly payment schedule, meaning buyers make a payment every two weeks instead of once a month. Typical loan length terms range from three to six years with five being average.
What if I Have No Credit or Bad Credit?
Buyers with no credit, bad credit, or credit in the process of being rebuilt can still get used car financing. While interest rates might not be the lowest, getting a loan and making payments on time will raise a buyer's credit score enough to where they could refinance with better terms.
Is Financing the Best Way to Buy a Car?
Buying a car with financing often makes the most sense for car buyers. Leases can be restrictive in terms of how many kilometres can be driven each year, causing drivers to pay penalties when the lease is up. Financing a car, paying it off, and then keeping it for many years is a great car buying strategy.
What are My Down Payment Obligations?
While a down payment is not required when financing a used car, it is often recommended. A down payment ensures that the loan amount is lower than the car's value in case the car is in an accident and totaled.
These are just a few things that shoppers should keep in mind when looking for a new car and applying for financing.