If you live in Canada and you are looking to buy a car, you are probably considering getting an auto loan to finance the purchase. Auto loans are great, because they allow you to put up anywhere from 20 to 50 percent of the car’s overall value as a down payment, while the rest of the money for the purchase comes from the loan. By getting auto loans, individuals and families can afford higher quality cars without emptying out their bank account to make the purchase! But how can you ensure you are getting a good deal on an auto loan? Here are some mistakes to avoid when you apply for a car loan:
- Ignore Monthly Payments
One of the biggest mistakes individuals make is to put too much emphasis on the monthly payment associated with the various auto loan deals they are offered. Ultimately, your monthly payment is going to depend more on the term of the loan than anything else. What really matters is the interest rate you are being offered.
- Avoid 60 Month Loan Terms
There is a temptation to put down an extremely low down payment (less than 20 percent) and go for the 60-month car loan option. But choosing such an option is a mistake, because it will put you under too much financial strain. A 60-month loan means you are going to be paying off this loan for the coming five years, along with paying interest on the principal balance. It is better to put a little more money down as the upfront payment, or choose a less expensive car to buy. Your ideal loan term should be anywhere from 36 to 48 months.
- Compare APRs
It is very important to compare both the intro APR and overall APR rates when you are presented with various loan options. Many dealerships and lenders will entice you with 0 percent introductory APR offers, because they do not want you to pay attention to how the interest rate changes after the first six to 12 months. You do not want to end up with a loan that has a 10 or 11 percent APR after the introductory period expires. Do some calculations and identify the loan that is going to charge you the least amount of interest over the entire period, not only the introductory phase.
- Pay Your Deposit by Credit or Debit Card
It may sound counterintuitive, but it is a good idea to pay your car’s initial deposit with a credit card. If you are not allowed to pay with a credit card, use your debit card. In either of these cases, you can dispute the transaction with your credit card company or the bank. If you pay with cash you withdrew from your account, you are going to have a harder time disputing the transaction if something goes wrong.
As long as you avoid these mistakes and exercise caution when picking between various car loan offers, you should be able to get Toronto used car financing without any problems.