When you’re in the market for a car, what’s the first thing that comes to mind? Finding one that fits the entire family? Finding one in your favorite color?
For many, the first thing that comes to mind is simply, “Can I even afford it?” If you’re not looking to pay cash for a new vehicle, you may be wondering how to finance a used car.
You may be wondering if it’s even possible for you to finance a used car in the first place.
If you’re looking to get a sweet new ride at an actually decent price, you’ll want to stick around for the only guide you’ll ever need for financing your used car.
How to Finance a Used Car
Almost 2 million Canadians bought a new or used car in 2019. Some of these buyers may have been thrown by the idea of financing their vehicles.
The process of financing can be complicated, but it doesn’t necessarily have to be.
So, what do you need to know before taking the plunge and signing the dotted line for your new ride?
1. Get to Know Your Credit
We’ve all been there, no one wants to willingly go down the rabbit hole that is credit checking.
You’ll see numbers, percentages, and fancy graphics, but through all that, you’ll also see a big dose of reality.
Even if you assume your credit is less than perfect, getting an exact number before going to the dealership can mean the difference between a decent interest rate and thousands of extra dollars on your loan.
As you’ll soon find out, applying for used car loans hinges significantly on your credit score. Going in with a plan and being knowledgeable about your current credit situation can definitely save you major hassle in the long run.
2. Keep Your Loan Term Short
When you’re in the market for a lease to own car, one thing many people don’t think about is the amount of time they’ll actually be spending paying the car off.
Some car loan lengths can extend as long as five to six years!
While it may seem like a good idea to have lower monthly payments, extending your loan for this amount of time can heavily increase the amount of interest you’ll be paying in the long run.
A long term loan can also make the total cost of your vehicle way more expensive than what you first thought!
Paying as much as you can upfront can help save costs later down the road.
3. Make as Big of a Down Payment as Possible
When you’re first figuring out how to finance a used car, some car dealerships may tell you that you don’t need a down payment.
They may even say that you could potentially pick out a car and leave the same day without paying a penny!
While this seems like an enticing offer, it’s usually a gimmicky sales routine that comes back to have major financial consequences in the long run.
If you’re in need of a vehicle and you don’t have the cash upfront to make the down payment, short term cash loans could be an option for you.
4. Understand Your Interest Rate
We get it, paperwork and numbers can be confusing. Put the two together, and you’ve described almost every adult’s nightmare.
The unfortunate truth about getting a used car loan is that you’ll inevitably have a ton of information to process.
Not only is it important to read the fine print, it’s especially important to pay attention to your loan interest rate.
Depending on your credit, used car loan interest rates can vary greatly. If you’re looking at a credit score of 750 or above, you may even be able to get interest rates as low as 0%.
While that’s great for buyers with exceptional credit, what about the rest of us? It’s important to note that car loans are one of the easiest loans to get for people with subpar credit.
There’s even a whole market of loans called “subprime financing,” which are loans that are specifically marketed to buyers with low or no credit.
Many people fear the world of subprime lending; however, as long as you’re smart about your loan and work hard to make payments on time, a loan of any kind can actually increase your credit.
5. Be Honest With Yourself
When you’re in the market for a lease to own car, one of the easiest things to do is to sign up for more than you can actually afford.
Newsflash, the stickers on the car windows aren’t always the most accurate!
Before even stepping foot onto the dealership lot, take a step back and really think about your budget. Remember you’re planning for what you can afford both today and three years from now.
Keep in mind that you can always pay more than your minimum payment each month in order to help pay down your loan even faster.
Being honest with yourself about your needs and wants when it comes to finding the best car for you can help save you time, money, and hassle in the long run.
It’s important to find a balance between what’s best for your budget and what you really want.
Ready to Finance Your Dream Car?
Throughout your search on how to finance a used car, you’ve probably ran into all types of contradicting advice. While we could go on and on about what to do when financing your used car, this last piece of advice is pretty simple.
Really, it’s that simple. Listen to yourself, remember your wants and needs, and do what feels right.
In the end, you’ll be the one driving the car and making the payments, so it really comes down to what you’re comfortable with!
If you’re ready to find your dream car, cash loans with Captain Cash is the best place to start!