So, are you about to pull the trigger on a used car and need a loan to finance it? The first thing you need to do is use the auto loan calculators provided by various financial institutions, dealerships, and specialist websites.
Indeed, this type of tool is very useful and can give you good indicators concerning your future payments. All you need to do is specify the price of the vehicle you wish to purchase, the value of the trade-in (and the balance due, if applicable), the down payment, the desired term and the expected interest rate.
As for this last point, whether you are dealing with the institution associated with the dealership or with another lender, it is good to know what could influence the interest rate.
First, there is the credit rating. The lower your credit score, the higher the interest rates; you are a greater risk. The credit score calculation ranges from 300 to 900 points, and buyers above 790 are entitled to some of the lowest interest rates on the market. on the other hand, someone with a score of 449 or less can expect to pay rates starting at 11.99%. Some lenders will even charge 20% or more for a used car loan.
An individual who has filed for bankruptcy, is in a low income situation, or is self-employed can also expect a higher financing rate. It is unfortunate, but it is a reality.
You should also consider having your credit report analyzed by a specialist. They can find errors (about 80% of reports contain errors, according to the Credit Bureau of Canada). By correcting them, you could get a lower interest rate.
Second, the length of the loan can impact interest rates. Although this is not always the case, sometimes the shorter the term, the lower the interest rate. This is another good reason to avoid long term loans.
Finally, it is important to emphasize that warranties and accessories sold with a vehicle should have no impact on the financing rate. Some merchants have a questionable practice of offering a lower rate if the consumer agrees to purchase certain products, such as an extended warranty over the life of the financing in order to “secure the loan”.
The AutoritÃ© des marchÃ©s financiers is clear: it is illegal for a financial institution to require the purchase of related products in order to reduce a rate. âA bank will never lower a financing rate because of the purchase of products. The decision is always up to the merchant, who has agreements with financial institutions, who knows his products, and who knows how to juggle them, âexplains Antoine Joubert. , a journalist from The car guide.