Personal Finance

Want to buy a car, unsure how the financing part works

  • Last Updated:
  • Jun 3rd, 2018 11:07 pm
[OP]
Member
Sep 29, 2014
377 posts
496 upvotes
Mississauga, ON

Want to buy a car, unsure how the financing part works

Hi everyone

I never purchased a car before and I'm unfamiliar with the process and need some help. Some background, I'll be buying a used car that's no older than 2014 and will be $20,000 maximum. I'd like to pay 1/3 of it upfront and finance the remainder over 48 months. What's the best way to get a loan? I'm currently with TD and they said there rates start at 8% for auto loans which seems high. Additionally how does it work if I buy a car privately? Will I even be able to get a loan for that? My credit score through TransUnion was 800 and I have no debts. Thanks for any help.
8 replies
Deal Fanatic
User avatar
Nov 24, 2012
5889 posts
2135 upvotes
Space
Used vehicles usually carry a higher interest rate. It may be worthwhile to look for a brand new vehicle.
Deal Expert
Feb 29, 2008
29100 posts
4787 upvotes
Montreal
Financing on used cars, as mentioned, is usually bad. Your best bet is to use your line of credit if you have one. These are usually below 5%.

Alternatively, what you can do is save your cash payment you want to put down, and then lease a new car that has the lowest possible interest rate, and a buyout value roughly equal to your cash payment. Then at th end of the lease you buy the car out. Think of it as a reverse downpayment.
Deal Addict
User avatar
Jul 22, 2008
1731 posts
518 upvotes
If you buy from a dealership there may be promotional financing from the manufacturer at lower rates than you could get independently. But generally, if you are buying a fairly expensive used car ($20k is in the ballpark where you could get a new vehicle for not much more) and expecting to finance it, you could end up paying the difference between used and new just in interest depending on how fast you plan to pay it off. Car companies will often offer 0% interest on purchase or lease of a new vehicle.
Deal Expert
User avatar
Jul 5, 2004
26902 posts
6135 upvotes
Use a line of credit instead
[OP]
Member
Sep 29, 2014
377 posts
496 upvotes
Mississauga, ON
For line of credit do rates differ between banks? And do I have to belong to the bank in order to get one? I bank with TD, would that make me limited to just them?
Deal Addict
Jan 16, 2016
1477 posts
1139 upvotes
Hamilton, ON
bnfenix wrote: For line of credit do rates differ between banks? And do I have to belong to the bank in order to get one? I bank with TD, would that make me limited to just them?
Yes, No, No
[OP]
Member
Sep 29, 2014
377 posts
496 upvotes
Mississauga, ON
Do you know which banks/credit unions typically have the lowest rates?
Deal Addict
Nov 8, 2017
1556 posts
888 upvotes
Get a personal loan. Generally cheaper than a ULOC in terms interest charged. Personal loans are like 5-6 %, unless you borrow from your house, that's assuming you own your house, in which case it would be lower.

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