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

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Jun 3rd, 2018 11:07 pm

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Jun 3rd, 2018 12:08 am

bnfenix [OP]: Member; Sep 29, 2014; 377 posts; 496 upvotes; Mississauga, ON

Jun 3rd, 2018 12:08 am

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

Jun 3rd, 2018 2:52 am

Solsearchin1: Deal Fanatic; Nov 24, 2012; 5889 posts; 2135 upvotes; Space

Jun 3rd, 2018 2:52 am

Used vehicles usually carry a higher interest rate. It may be worthwhile to look for a brand new vehicle.

Jun 3rd, 2018 6:46 am

mr_raider: Deal Expert; Feb 29, 2008; 29100 posts; 4787 upvotes; Montreal

Jun 3rd, 2018 6:46 am

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.

+1

Jun 3rd, 2018 6:57 am

Rishi: Deal Addict; Jul 22, 2008; 1731 posts; 518 upvotes

Jun 3rd, 2018 6:57 am

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.

Jun 3rd, 2018 8:45 pm

Shaner: Deal Expert; Jul 5, 2004; 26902 posts; 6135 upvotes

Jun 3rd, 2018 8:45 pm

Use a line of credit instead

Jun 3rd, 2018 9:12 pm

bnfenix [OP]: Member; Sep 29, 2014; 377 posts; 496 upvotes; Mississauga, ON

Jun 3rd, 2018 9:12 pm

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?

Jun 3rd, 2018 9:30 pm

Altera: Deal Addict; Jan 16, 2016; 1477 posts; 1139 upvotes; Hamilton, ON

Jun 3rd, 2018 9:30 pm

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

+1

Jun 3rd, 2018 9:54 pm

bnfenix [OP]: Member; Sep 29, 2014; 377 posts; 496 upvotes; Mississauga, ON

Jun 3rd, 2018 9:54 pm

Do you know which banks/credit unions typically have the lowest rates?

Jun 3rd, 2018 11:07 pm

User455957: Deal Addict; Nov 8, 2017; 1556 posts; 888 upvotes

Jun 3rd, 2018 11:07 pm

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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