There are two main factors you need to understand in order for you to get the best possible interest rate for a car loan in Toronto Ontario: your personal financial situation and what current lender options, financing offers and interest rates are doing. Here are a few main factors that affect your interest rate:
- Where you borrow the money from. You will have various scenarios as to which financing route you take. Unless it’s a private lender, you will most likely be working with banks, automaker’s financing or a credit union. There are pros and cons for every avenue.
- What kind of car are you buying. Is it new?used?very used? Newer car rates are usually the lowest.
- The loan-term length. Many automakers offered a zero-percent financing to keep cars moving after the recession, now many of these automakers are offering long-term loans up to five or six years. Longer loans tend to come with higher interest rates.
- Your credit score. The better credit a borrower has, the lower the rates. There are estimates where only %15 of buyers actually qualify for zero-percent offers from the automakers.
There are three primary lending sources that a car buyer can borrow money from: automakers, credit unions and banks. Any of these sources can offer loans that come through the dealer, who acts as a middleman and takes a percentage in the process.
This doesn’t mean that getting a loan through a car dealt is going to be the more expensive route. The truth is that dealers provide the only way to get low rates, including zero-percent financing, from automakers.
Interest rates are marked up and passed on to you by car dealers who borrow the money at wholesale rates. The rate you get may be the same as one you arranged yourself, because the dealer’s rate is lower. Your best option is to make sure you know what your best rate is before you get to the dealership.
USED OR NEW?
Generally speaking, a new-car loan rate is better than a used-car rate. Only new cars normally qualify for zero-percent financing, the some automobile companies will occasionally push pre-owned cars with zero-percent offers. But for the most part, the older the car, the higher the interest rate is.
LENGTH OF THE LOAN TERM
The shortest term length you can afford will be better for you to keep your total interest lower; the longer the term on a car loan, the more you’ll pay in interest. The average term is more than 60 months now for a new-car loan, this leaves a borrower vulnerable to having to pay more on the loan than the car is worth.
REJECTED FOR A LOAN, WHAT TO DO
If you’ve been rejected, don’t try again until you figure out why you’ve been declined the first time, and take the necessary steps to address it. Your credit rating is the primary determinant if you get approved for a loan, if you didn’t check your credit score before your first application, it’s probably a good idea to do so before you re-apply. However, many application will hit your credit score as it is a credit check, and this can knock off some more pints which can make your situation even worst.
When you’ve taken all possible steps to improve your credit score, what’s recommended is to shop around for a good interest rate prior to returning to a dealership. A great option are the credit unions; their interest rates are usually lower than banks and they’re more likely to look into a subprime applicant situation and make exceptions if there is a faulty credit history results from unemployment, divorce or a one-time medical expense.
If you have a saving or checking account at a bank, your financial history won’t be a mystery to them, and this established relationship can work in your favour. Banks find it safer to sell a service to an existing customer as opposed to find new customers.
Lastly, financing a car form the dealership can be a desirable option as well. Sometimes the rates for new car financing in Toronto are the lowest available, and only a dealer can offer these rates from the automaker. Also, if you’ve had little success with other loan avenues, a dealership might be more inclined to make financing accommodations if you’re buying one of its cars, particularly a used one.