When you need to finance a car, the interest rate can play a big role in how much you’re paying monthly. The lower the rate, the lower your monthly payment. While lenders look at each individual case before making a decision, there are a few things you can do to get the best car loan interest rates Canada.
Shop Around For Car Loan Interest Rates Canada
The only way to know you’re getting a good deal is to shop around for loans. Try applying through different banks as well as through the dealer’s preferred lender. Remember to look more at the rate than at the monthly payment. Some lenders will trick consumers by spreading the loan out over a longer term. The car loan interest rates in Canada are higher, but the monthly payment is lower, so the consumer thinks he’s getting a good deal. The trick is that he’s making those payments for an extra year and paying more overall.
Improve Your Credit Score
Credit score is probably one of the biggest factors in determining car loan interest rates Canada. If you know you’re going to purchase a car in the next few months, order a copy of your credit report and correct any mistakes you find. Make sure to pay your bills on time and work hard to reduce or eliminate any debt you have. All of this can improve your credit score.
Increase Your Down Payment
Interest rates are one of the ways that lenders earn money to try to cover the costs in case you default on your loan. If you have a significant down payment for the car – 20 percent for a new car and 10 percent for a used car – the lender will feel better about lending you money and you may qualify for lower rates.
Decrease the Loan Term
There’s often a variation in interest rate based on the term of the loan. A 5-year loan, for example, is likely to have a higher interest rate than a 3-year loan. If you can afford the payments on the 3-year term, consider that option. If not, it might be more advantageous to look at cars that are more affordable rather than taking on a 5-year loan.
Often, the interest rates for new car purchases are lower than the rates for used car purchases. However, new cars tend to be significantly more expensive. Balance the better interest rate you’d get with a new car with the lower cost of a used car. If there’s not a big difference, you may find that the new car is the better deal for you.
Buying a car is a complicated process, but it doesn’t have to be difficult. As you compare auto loan rates, make sure that you are truly comparing apples to apples. It’s only when the loan amount and loan term are the same that you can truly see when you’re getting a better deal with the lower interest rate. Don’t let dealers talk you into higher interest loans with lower monthly payments.