Buying A Car With Bad Credit – Is A Long-Term Or Short-Term Loan A Better Option? Pros And Cons

Bad Credit, Used Cars

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buying used car with bad credit

When you’ve got bad credit, the often-complex process of purchasing a used car becomes even more difficult. You may have a hard time getting pre-approved for an auto loan, getting good deals on vehicles, and you may even be turned away from some dealerships – just because your credit score is not up to par.

At Ride Time, we have a different way of doing things. We believe that Canadians with bad credit deserve high-quality vehicles, and we’re always willing to work with you – no matter what your credit score may be.

But still, there are quite a few questions you may have about buying a used car with bad credit. For example, is it a better idea to get a longer-term loan with a lower monthly payment, or a shorter-term loan that offers a lower total cost of purchase? In this article, we’ll discuss the pros and cons of each approach.

Long-Term Loans – Pros And Cons

For our purposes, we’ll use a 72-month loan as our baseline for a “long-term” loan. This is a 6-year loan, which is a bit longer than the industry standard of about 5 years.

Let’s say that you’re interested in a car that’s worth $15,000, but you can’t afford a down payment, so you choose a 72-month loan with an interest rate of 10%. You would end up paying $278/month, which is fairly reasonable. The total end cost of your loan would be $20,008.

With this scenario in mind, let’s talk pros and cons.


  • Lower monthly payments
  • You may be able to refinance to a better rate in the future
  • Reduces cost of monthly payments without requiring large down payment
  • Greater financial flexibility – less money paid per month towards your car


  • You end up paying significantly more money for your car
  • You could end up buying a car you can’t afford because of lower monthly payments
  • Car troubles that happen after your warranty ends could cost you quite a bit of money

A long-term loan is a good idea if you need low monthly payments, can’t afford to put much (or any) money down, and really need a car with bad credit in Canada. However, a short-term loan is often a better choice for many Canadians.

Short-Term Loans – Pros And Cons

Let’s consider a situation similar to the one above, but you are in a slightly better financial situation and can afford to spend a bit more per month on your car payment. You also have some money for a down payment.

You get a $15,000 loan, and pay $2,000 as a down payment, and you decide that a shorter loan is better for you. You choose a very aggressive 36-month loan, which puts your monthly payment at $419.

That’s quite a high monthly payment. However, the total cost of your loan will be $17,101 – almost $3,000 less than if you chose a long-term loan with no down payment.

The above scenario illustrates the primary pros and cons of shorter-term auto loans


  • Significantly lower total cost of your loan
  • Can be combined with large down payments to reduce monthly costs further
  • You get possession and own your car more quickly, building equity


  • Relatively high monthly payments for your car
  • Could increase repossession risk if you fail to budget properly each month
  • Many people with bad credit simply can’t afford short-term loans with high interest rates
  • Ties up a significant portion of your monthly income

If you are in good financial health, can afford to make a high down payment, and are willing to make some sacrifices, a short-term loan can save you some serious cash, compared to a longer-term loan.

So, What’s Best For Me?

Well, that depends on your situation! If you have bad credit, it’s likely that a longer loan will be helpful for you – though you’ll pay a bit more in the end, you will get access to a reliable car, and the monthly payments will be reasonable.

But if you can afford it, a short-term loan can save you quite a bit of money. Still confused? Don’t worry – come to Ride Time!

Our lending partners focus on working with Canadians who have bad credit. With just some basic information like employment/income verification and a valid Canadian licence, we can find you a loan that’s perfect for you, and get you into one of our high-quality used vehicles.

So don’t wait. Come in today, and see how Ride Time can get you the car you need – no matter your credit score!


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