Unless you live somewhere with highly unstable currency, cars can be quite a bad investment. It’s near impossible to get back what you paid for them. Nevertheless, if you were brave enough to include getting someone a car on your Christmas shopping list this year, then here’s how to avoid a loan so bad the interest on it far exceeds the principal amount.
DO YOUR HOMEWORK
There is no such thing as a bad credit score for auto loans. Since it’s much easier for banks to reclaim a car, you nearly always end up getting one approved. However, the same can’t be said for car dealerships, which advertise temptingly low-interest rates on their fleet but fail to mention the fact that they only apply to those with a good credit score. So, look around, make sure to read the Terms and Conditions, and ask for a better rate.
USE A BARGAINING CHIP
If dealerships fail to finance your dream car, look elsewhere. Get your local bank, credit unions, and online lenders in the loop. They may come up with a better deal, or at the very least, a rate lower than that provided by the dealership, so that you can then take it to them and ask for a quote that falls more within your budget.
SHORTER-TERM FOR THE WIN
Even though a brief installment plan means you will have to channel your inner Scrooge to save enough to make it for the next few months, the rate on that car loan will be much lower than one on a longer plan. What’s better? A plan where the principal is high, or one where the gap created by a lower principal is made up for by an exorbitant interest rate?
The only thing trickier than securing a loan on a house is doing it for auto finance. Canada is, however, home to many car dealerships, which means there are more than enough alternate ways to fund your Christmas list. All you have to do—if you can’t pay with cash—is get a deal with as low an APR for as short a duration as possible. After all, no one wants to enter a slave contract that drills a hole in their pocket for Christmas.