Beginners Guide to Used Car Loans in Canada

by Good Fellow's Auto Wholesalers Used Car Dealership

Few of us have enough cash on hand to purchase a car outright, which is why many dealerships offer auto financing options instead. If this is your first time purchasing a used car, you may be confused by the process. To help, we've explained how used car loans work in Canada down below.

What Is a Car Loan?

When you decide to take on a car loan, you are receiving money from the lender which you then use to purchase your vehicle. Over time, you will need to pay back this money, plus interest, and other fees. These payments are typically made every month, or in some cases, bi-weekly.

Your Used Car Loan Terms

The amount borrowed, your lender's desired payment schedule and your credit will be the largest factors in determining the length of your loan. Most Canadian car loans last anywhere from four to 6 years. They can be lower or higher, though, where the shorter it is, the higher the payments will be. Be sure to consider your future ability to repay the loan before agreeing to any terms.

Your Interest Rate

The interest rate on a car loan is the amount that must be paid in addition to the actual amount borrowed. This amount is charged by the lender to offset the cost of extending a loan. Interest rates do not affect the value of the car and are purely a measure that goes to the lender as compensation. The longer the loan term, the more interest will be paid to the lender on top of the cost of the vehicle. Interest rates are mainly determined by the current market rates paired with the credit score of the borrower. The amount of the loan and the down payment also play a part, but not as much as a consumer’s credit score.

If you're interested in securing a used car loan in Toronto, Good Fellow's Auto Wholesalers would love to assist you. Contact us today at 1 (855) 581-9590 for more information.