If you’re considering the purchase of a new or used car, chances are that you’re going to need financing. Most people don’t have the money to get a car without a loan – so you’ll need to make sure you get a great rate on your auto loan.
In this article, Ride Time will look at a few time-tested and proven strategies that can help you save money on an auto loan – even if you have bad credit in Canada!
1. Get Pre-Approved By Another Bank Or Lender
Loan pre-approval is a very powerful negotiating tool. You can walk into a dealership with proof that you are ready to buy a car, and have financing sorted out.
Because dealerships often have incentives to use a preferred lender, or their own in-house lending company, they may even offer you a better deal than your bank, or another lender. This is a great way to save money on your auto loan.
2. Put Down The Largest Down Payment You Can
If you really want to save money on your loan, you should put down the largest down payment you can – and 20-30% at a minimum. Why? Here’s an example.
Let’s say you buy a $15,000 used car at a 3% interest rate over a 5-year term, and pay $5,000 as a down payment. You’ll pay $781 in interest over the lifetime of the loan. Not bad, right?
But if you bump that down payment up to $7,500, you can bring that interest down to $586, and save nearly 200 bucks.
If you can spare the cash to make a bigger down payment, you will save big in the long run – especially if you only qualify for high, subprime interest rates.
3. Shop For Used Cars
Used cars save you money in a variety of ways. Here are just a few of them.
Depreciation – We’ve all heard that a new car depreciates 20% or more as soon as you drive it off of the lot, and this is pretty much true! Over the first year of ownership, a new car can depreciate by 20% or more, depending on its make and model.
Getting a used car that’s just a few years old is a good way to avoid this initial depreciation hit, and purchase a great car for a lower price.
Lower total value – The value of the car will be much lower, which helps lower your auto loan payment. It’s cheaper to make payments on a $15,000 vehicle than it is to make payments on a $25,000 vehicle, after all!
Lower taxes, registration fees, extra costs – Most extra costs, such as gap insurance coverage, registration fees, and taxes, are calculated based on the value of your car. These costs are usually “bundled” into your auto loan. By lowering them, you can reduce the overall cost of your auto loan.
4. Round Your Payments Up Every Month
The faster you pay down your loan, the less interest you’ll pay. And if you pay extra each month, that will go directly towards the “principal” loan amount – not the interest that you owe.
Consider rounding your loan payments up to the nearest $50 or $100. For example, if your payment is $210/month, pay $250 or $300 per month, if you can afford it. This may make your finances a bit tighter month-to-month, but you will save a lot of money in the long run.
How much can you save by rounding up your payments? Check out this tool from Bankrate, and calculate your total cost savings.
Follow Our Tips – And Save On Your Auto Loans!
With this advice, you’ll be able to save big on your next auto loan. And if you need an auto loan in Canada – but you have bad credit – don’t worry!
At Ride Time, we believe in second chances. We work with 15+ lenders who specialize in giving reasonable loans to Canadians with bad credit.
With basic proof of income and employment, as well as a Canadian driver’s licence, we can help you get a great deal on a reasonably-priced used car! Get started today – whether you’re in Winnipeg, or anywhere else in Canada
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