For most car buyers
, paying for a new or pre-owned vehicle involves a financial arrangement with a dealership or a banking institution.
Both options are popular; it depends on your personal preferences.
New car dealerships offer a range of financial options for purchasing or leasing vehicles, with the added convenience that all of the financing arrangements can be handled at one place.
Dealerships and manufacturers frequently offer unique financing programs and incentives. Zero per cent financing, cash rebates and dealer discounts are a few such examples.
Sometimes, manufacturer-sponsored programs are more attractive compared to traditional lending institutions (that is why car buyers should read car advertisements carefully).
The other option is to talk to your financial institution about securing a bank loan. It allows you to shop with confidence, knowing how much you can afford.
When seeking financing, always compare rates. Ask about bank fees and early payback options. In addition to the interest rate, compare other costs associated with a loan, such as loan insurance and processing costs.
I have heard stories of people who bought vehicles on the basis of an attractive interest rate or low monthly payments. These individuals have come to regret their decision because they did not buy vehicles that were right for them.
Throughout the car-buying journey, focus on the vehicle you need, as opposed to the vehicle you want. This is an important distinction; it is easy to be attracted to a sports coupe or a luxury sedan, but these vehicles may be impractical or beyond your budget.
Also Read: The right and wrong way to buy a car in Ontario
When you buy a vehicle, you are likely to drive it for four or more years. You might as well find a vehicle that fits your lifestyle and your budget, with the best possible finance rate, as opposed to buying the wrong vehicle with a great finance rate.
Remember, when you sign a contract to purchase or lease a vehicle, it is a legally binding agreement. You cannot void a deal after you have signed it, just because you do not like some aspect of the agreement.
Doing your homework also includes obtaining a copy of your credit report. This document details your credit history, personal information, activity that might have resulted from slow payment history or unpaid bills, etc.
If you discover any errors in your credit report, seek to have them corrected at once. Inaccurate information will have a negative impact on your ability to borrow money and it could result in paying a higher interest rate.
A poor credit report does not mean you cannot buy or lease a vehicle. Banks and lending institutions are willing to forgive a late credit card or loan payment if other factors are favourable.
When determining whether to lend you money, banks will review your overall credit worthiness, employment history, debt-to-equity ratio and your ability to repay a loan.
Those with poor credit history may have to pay a higher interest rate, but it does not mean that they cannot get a loan.
When you are comfortable with a financing arrangement that suits your budget and a vehicle that suits your driving requirements and lifestyle, it does not hurt to discuss your decision with a friend or family member. An outside observer can spot things that you might have missed.
When you conduct proper research into financing a vehicle, it makes the entire car buying (and ownership) experience a lot more satisfying.
This column represents the views and values of the TADA. Write to firstname.lastname@example.org or go to tada.ca. Susan Gubasta is president of the Trillium Automobile Dealers Association and is president/CEO of Mississauga Toyota. For information about automotive trends and careers, visit carsandjobs.com.