Taking out a car loan is not something you should do without thinking about it thoroughly through. The decision starts with an inspiration, some emotional excitement, and then needs to be taken into account as practical considerations. This guide will help you understand your choices and hopefully help you make a good decision concerning car loans.
First and foremost: can you afford a new car?
If you are thinking about buying a brand-new luxury vehicle, we hope you have a large budget. For most people, they need a less expensive vehicle. The median price of a new car reported by Automotive News Canada was $33,464 in 2017. This increases by about 3% each year, so the estimate for 2019 is about $35,502.
Add taxes of 13% RST plus registration and license fees of $60 to $120 in Ontario to make the total closer to $40,200. When financed, the monthly payments will be around $600 to $950 depending on the term of the car loan and how much you have for a down payment.
Then, you need to consider auto insurance. The average auto insurance rate in Ontario reported by Ratelab is $1,500 per year. This is about $125 per month. Add to this an average of $50 for monthly maintenance. And then, there is the price of gasoline, which Global Petrol Prices says is $1.34 per liter (as of September 2nd, 2019). Getting the right insurance for your vehicle is paramount and must not be taken lightly, as you want to make sure you are as covered as possible for any eventuality. If you are going to a motor trader, you may want to check and see if they have insurance too so you both are covered. There are trade vehicle insurance policies that can be looked at so both are assured that if the car is being delivered and there is an accident, both parties do not lose out on money if there is any damage via transit, etc.
When you add everything up, you get the estimated monthly cost of owning a vehicle. Then, you need to see how that fits into your monthly budget for living expenses to determine if you can afford the car you want.
Then ask yourself this: can I afford not to get a new car?
If you do not have reliable transportation, your freedom is restricted. With the harsh winters in Canada, public transportation or car-for-hire services are not something people can always count on when they need to get to work. Relying on family members and friends to take you anywhere you need to go puts a burden on them.
If you already own an old car that is ready to break down, it might be time for a replacement. Maybe, you cannot afford a brand-new car; however, there are plenty of previously-owned vehicles to choose from that may be within your budget.
How do I qualify for a car loan?
Wouldn’t it be nice to know if you qualified for a car loan ahead of time? For those in Alberta and Ontario, there are car loan specialists who provide car loans for almost everybody. Just apply while you are thinking about getting a car. Then, you will know ahead of time what car loan you qualify for and the terms. In this way, you will have confidence when shopping for the best deal you can find.
Will I get the car I want?
If your choice is reasonable according to your budget, the answer is yes. There are many new cars to think about and over seven million previously-owned vehicles for sale in Canada to choose from. You can always make adjustments and get a car that is suitable for you. The important thing is that you are getting a vehicle that you like and that you can rely on.
How will I repay the car loan?
One technique to consider is to take out the car loan for the longest period possible. Consequently, your monthly payments will be as low as they can be. However, rather than paying the loan slowly; instead, make double monthly payments when you can. This will reduce the loan balance more quickly to save money on interest. If money is tight, you can still only make the smaller monthly payment to get through a rough spot until finances recover.
The final evaluation
When thinking about a new car, there is no reason to hesitate to get a loan approval. After thinking through the numbers, plans and documents, you should be able to tell if getting a car loan is right for you. For most people, it is. You get to have a new car that will save you money in other circumstances. Do that process first and then the decision about buying a car is easier.
