How to Finance a Used Car in Canada

If you’ve found the new-to-you car of your dreams but don’t have the cash to pay for it in full, financing is the solution. In this post we’ll go over everything you need to know so you can secure the right kind of auto financing for your vehicle and your bottom line.

How car financing works

Taking out a car loan eliminates the stress of coming up with a large sum of money all at once. However, it also adds another monthly payment to your budget, so it’s important to understand the ins-and-outs of car financing before looking at the different lending options.
Your monthly car loan payments are calculated using three elements: principal, term and interest rate. 
Principal is the total cost of the vehicle, including any fees the lender or dealership may have for the car loan and any add-ons you choose.
Term is the length of time that payments will be made on the loan — typical terms range from 36 months to 72 months.
Interest rate is the percentage the lender is charging you to borrow money. 
Fixed rate loans offer predictability because the interest rate stays the same throughout the term of the loan. If you’re less concerned with fluctuations and want to benefit from times when interest rates are lower, you can opt for a variable rate loan.

Borrowing for new and used cars

New and used cars get treated differently by lenders for a few reasons. For starters, new cars have a higher sticker price than pre-owned cars. While this usually means buyers can cash-in on incentives like rebates or 0% financing for a certain period, it also means loan payment terms will be longer and monthly premiums will be higher. Also, new cars are usually more expensive to insure. 
Used cars, on the other hand, cost less to purchase. They do, however, require more upkeep than new cars and interest rates on pre-owned vehicles are usually higher — especially if you don’t have much for a down payment or have less than stellar credit. 
Check out our post for things to consider when deciding whether to buy a new or used car.

Ways to finance a used car

There are two main ways to secure a car loan in Canada: through a financial institution or directly through a dealership. Each route has its advantages and it’s a good idea to shop around to ensure you’re making the best decision for your financial situation. 
Before applying for any loan, it’s a good idea to check your credit rating and determine your budget. Whether high or low, your credit rating will dictate the interest rate on your loan; knowing your budget will help you figure out how much you can afford for monthly payments. If your monthly payments are more than your budget allows, you run the risk of defaulting on your loan and damaging your credit rating.
Figuring out your budget can also help you decide how much you’re able to put forward as a down payment —  a larger down payment often translates to lower rates because you’ll be borrowing less.
Now, let’s get into the differences between bank financing and dealership, or in-house, financing.

METHOD 1: BANK FINANCING

If you have a good credit rating securing a used car loan through a bank or credit union might be the right choice for you. Getting a loan through your current financial institution can be a convenient option since all of your finances are in one spot. If you’re an established customer, your bank might even offer you a discount on interest rates or fees and most banks are open to negotiating the terms of your payment period.
However, because of their stricter rules and regulations, banks will only grant loans to customers with favourable credit — even for pre-owned vehicles. So, if you have a low credit rating you might not get approved. 
Some banks are wary of granting loans for used cars because they depreciate in value quickly. It’s a good idea to ask about the financing options for the specific make and model of the car you’re interested in.
It can also take longer to get approved through the bank, so you might be stuck waiting several business days to find out if your loan application has been accepted.

METHOD 2: IN-HOUSE (DEALER) FINANCING

The second option is to get financing directly from the dealership you’re buying a car from. The main advantages of in-house financing are speed and flexibility. 
Because the application and approval process is a lot quicker, many dealerships are able to offer same-day financing. That means you can take a test drive in the morning and drive your new (or new-to-you) car off the lot by the afternoon. This way you won’t have to worry about someone else snatching up the used car you fell in love with while you’re waiting for financing to come through. 
Dealerships offer significantly more flexibility for borrowers with less-than-stellar or non-existent credit (as is the case with students or new Canadians). If you have poor credit or have gone through a bankruptcy, shopping for a vehicle can be frustrating and disappointing. In-house financing can help get you into the car you want, even if you’ve been previously turned down for a loan through your bank. 
At Birchwood Credit Solutions, we look beyond our customers’ credit rating. Once you apply for financing, our team will review your whole financial situation and work with you to pick an appropriate budget and payment options. We can even offer you help and advice on how to repair your credit rating.
Learn more about Birchwood Credit Solutions’ Bad Credit Car Loans and quick, hassle-free application process. You can also contact us to talk directly to a car financing expert.

When is the best time to buy a car?

Getting a good deal on a new or used car can depend on the time of year you buy it. Make sure you keep an eye on the calendar so you can take advantage of seasonal factors affecting the car trade and take advantage of the best month to buy a car. So if you are looking for the best time of year to buy a car, here are some dates to bear in mind.

  • Best time to buy a new car
  • Best time to buy a used car
  • Your next step

Best time to buy a new car

Choosing the best time of the year to buy a car could potentially save you thousands of pounds.

Here’s what to bear in mind:

  • Convertibles are more desirable in the summer, so there might be bargains to be had in the winter.
  • At the end of each quarter – particularly the end of June and December – dealers might be keen to hit their quarterly sales targets and more likely to offer you a good deal.
  • Demand for four-wheel-drive vehicles usually peaks during autumn and winter because of poorer weather, so you might get a bigger discount in the summer.
  • In February and August many dealers offer some real bargains, while sales are slow as buyers wait for the new number plates coming in March and September. But If you take advantage of this lull, your ‘old’ number plates will make your car seem older than it really is, so it will depreciate faster.
  • Find out when new models or ‘face-lifted’ existing models are due out, then buy the previous version during its last few weeks in the showroom. Dealers will be want to shift this stock and be more likely to offer you a good deal. But remember an older model will depreciate faster than the new arrivals, even though it’s roughly the same age.
  • Showrooms are quieter on weekdays so drop in on a Friday – when the dealer will also be keen to meet their weekly target. This gives you an advantage when bargaining with the salesperson.
  • Wait a few months after launch before buying a new model – by then there will be less showroom buzz about it so the dealer might well offer you a better deal.

Best time to buy a used car

Seasonal trends in sales of new cars have a knock-on effect on the cost of used cars.

Time your purchase right and you could get a real bargain:

  • Avoid buying used convertibles in the spring or summer – wait until winter, when demand is much lower.
  • March and September are the peak months for sales of new cars, often through part-exchange deals. So dealers will have lots of used cars to sell, which puts you in a strong position when negotiating.
  • Dealers are also often keen to clear out used cars in July and early August in readiness for new models and the registration plate change on 1 September.
  • December and January are quiet months for the used car trade. Cars aren’t on people’s minds around Christmas and the New Year so dealers and private sellers are keen to make a deal.
  • Buy four-wheel-drive vehicles in the summer – demand peaks in the late autumn and winter because of the poorer weather.

Advice and Negotiation Tips for Shopping Used Cars

Buying a vehicle is never easy, but buying a used vehicle is downright difficult. You will get your hopes up numerous times by an ad that seems too good to be true, only to be let down when, in fact, it was too good to be true. Someone might advertise their car as “Like new! Mild wear and tear! Runs great!” when in actuality, it is very much old, has extensive wear and tear and doesn’t run at all. Yes, it happens. That is why, when shopping for used cars, you should know where to turn and how to negotiate. Don’t fall for a scam and bring home a lemon, and use the following advice to help ease the pain of your search:

Go to a Dealer

Sure, you know someone who found a great deal on Craigslist, or are even friends with that lucky person who bought a car on Ebay ten years ago and it’s still running great today. However, those people are the exceptions to the rule that states that you should never, ever shop for used cars online. Not only is it impossible to tell the true condition of a vehicle without actually seeing it, but also, you’re risking spending thousands of dollars a car that may take a dump on you ten minutes after purchasing it. Then, because there is no warranty, you’re stuck with an old car that doesn’t run and no money to fix it.

Find the Car You Want

Before you head to the dealership, know what you’re looking for. If you head to the dealership without a clue, you may end up purchasing a vehicle that is over your budget and all wrong for your needs. Identify the traits you need in a new used car: good gas mileage, three rows, ample storage space, etc. Once you do this, set a budget and head to the dealer.

Negotiate Like a Pro

Negotiating for a fair price might be the most daunting part of the car buying process, but it’s necessary. Dealerships expect you to negotiate and price their cars accordingly. Use all the knowledge you have regarding the vehicle to bring the price down.

Use the tips above when shopping for used cars to get the best your money can buy.

3 Ways Dealers Help You Find the Perfect Used Car

Despite popular beliefs, seeking the assistance of a dealer while searching through the multitude of available used cars is a smart move which any budget-conscious buyer should consider when in the market for a ride of any shape, size or brand. There are many ways in which using our dealership for assistance throughout the shopping process makes the whole experience simpler and much less stressful, but the top three include:

We Offer a Larger Selection

Whereas you may have to drive hours to view a single car when shopping among private sellers, our large selection of vehicles gives the ability to view many new cars at once, increasing your chances of finding the perfect used car quickly. This saves you time, money, and plenty of energy with which to enjoy your newly-purchased ride after the decision has been made.

We Offer Financing Options

In most cases, even used cars have financing options available for buyers of all backgrounds. This means that you won’t be restricted to one or two cars on the lot that fit within your immediate budget. Together, you and our expert staff members can work out a payment plan for practically any of our used vehicles, expanding your opportunities and helping to ensure you find the right car for your needs.

We Offer Quality

Aside from offering an excellent quantity of vehicles, we always ensure that our used cars present quality under the hood as well. Before selling cars to customers, we inspect the vehicle and make repairs as necessary to ensure you’re getting what you pay for: a reliable ride that’ll get you from one place to another without a hassle. When you find the right car, you’ll never have to worry about it being a lemon.

These are just some of the ways in which we can help you find your perfect used car and get you on the road again in no time. Check with us to learn more about your options.

What You Need to Know to Save Money on a Used Car

Shopping for used cars can take a significant amount of time and effort, but once you find “The One,” all that hard work will be well worth it when you’re able to save money and still take home the wheels you need to get from point A to point B. That said, there are a few ways you can make the used car buying process a little bit easier on yourself. How, you ask? Consider doing the following before heading to the dealership:

Set a Budget and Stick to It

Shopping for anything without a budget is dangerous, but shopping for a use car without a budget is just plain reckless. If you head to the dealership without a set figure, you risk driving away in a new vehicle you cannot only not afford, but that has features you really don’t need.

Know What Type of Vehicle You Need

If you don’t have an idea of what type of vehicle you need, you risk driving away in a convertible when what you really need is an SUV with four-wheel drive. It’s easy to be sold on flashy models and tiny sports cars when you don’t have a vehicle in mind. Do your research beforehand and make a list of what you’re looking for in a new used car, such as three rows for your children and their friends, and four-wheel drive to help you navigate safely on snow-laden roads.

Review the Pricing Guide

Once you know what type of vehicle you’re looking for, check the average price for various years. If you don’t know how much a vehicle should be worth, you risk overpaying for a vehicle that may not be worth even half of what you bought it for.

Buying a used car can be a great way to save money, but only if you go about the car buying process in the right way. By setting a budget, knowing what type of vehicle you want and reviewing the pricing guide, you’re sure to save money and still drive away in a quality used car.

Is a Used Car Right for You?

If you’ve been considering getting a car, truck, SUV or van to replace your existing one, the odds are that you have many questions and items to consider already. However, one of the most prominent things on your list of considerations is probably whether or not you want to look at used cars or new ones. There are certainly some great benefits to owning a used car, but there are also some challenges which you must be prepared to face. Before visiting our lot to check out the excellent options of both new and used options available, consider the following to get an idea of whether or not used vehicles are the right option for you.

Maintenance

Depending on how old the used car you happen to select is, it may need a bit more maintenance than a brand new car. Regardless of how well-built a car is, parts wear out over time, leaving you in need of repairs and upgrades. However, this being said, repairs and replacements are likely to cost less than those performed on new cars, which is something to consider closely.

Depreciation

A great thing about used cars is that you don’t need to worry about them depreciating as soon as you take them off of your lot. This makes used vehicles an ideal option for anyone who’s purchasing a car for the time being, but who knows that they’ll want to upgrade in the near future. This way, you don’t need to worry about your ride retaining its value.

Price

While price isn’t always the most important issue, it’s certainly something to be considered when making an important purchase of this type. If you’re working on a relatively tight budget, it may be a better decision to take a look at our selection of excellent used vehicles rather than going overboard on an entirely new model.

Deciding whether or not used cars are the right option for you is the first step. The first is coming to check out our excellent selection to find the perfect solution for your transportation needs.

Helping Used Cars Last Longer

Used automobiles are the most common mode of transportation for most people. The individual life of any used automobile can be dramatically extended if you give it a little TLC and proper maintenance.

Follow the Maintenance Schedule

The owner’s manuals for used cars will give you a guideline for how often you should get an oil change and when it needs to be serviced. Don’t skip the routine stuff, it’s what keeps most vehicles running smoothly for years.

Replace Parts Before They Become a Problem

If your mechanic tells you the brakes will need replaced soon, go ahead and get them replaced now. Most people who start out thinking, “I’ll do that in the next few months,” forget about it until they’ve burned through their brakes or damage has been done. Preventive care is much less expensive than repairs.

Minimize Short Trips

Every time you start your engine, it takes a toll on gas mileage, your muffler and the engine itself. If you have errands to run, combine them whenever possible. If you have a short commute to work of just a few miles, see if you can carpool with someone or rideshare. A few longer trips are better for your car than a lot of short ones.

Check the Fluids Regularly

Oil, antifreeze, transmission fluid and power steering fluid should be checked and either topped off or changed regularly. The time to add more fluids is not after you’ve burnt up the oil and incurred expensive repairs.

Rotate Tires

Rotating the tires on used cars helps lengthen the life of both the car and the tires. Tire rotation reduces uneven tread wear and improves the vehicle’s ride. In most cases, you should rotate them every 8,000 to 13,000 kilometres or twice a year.

Change the Air Filter

Whether you do it yourself of have it done by a mechanic, changing air filters prolongs the life of used and new cars, improves acceleration and ensures better gas mileage.

Used cars can last for years if you take care of them properly following the above recommendations.

Get a Car Loan With Bad Credit

Have you been hesitant to replace a car that is unreliable and in need of replacement because you do not have good credit? Obtaining a new or used vehicle may be easier than you think. Bad credit car loans are available to many consumers who did not even realize that they would be able to qualify for financing.

 

Present Positive Financial Factors

 

Even if you do not have good credit, you may be able to present certain positive considerations to lenders that increase the likelihood of obtaining a loan. These factors include:

  • saving a down payment
  • being at your current job for some time
  • meeting threshold monthly income amounts
  • living at your current residence for a certain period

 

If you are able to present more than one of the above, it may enable you to receive better financing terms.

 

Research Your Options

 

Spending some time investigating different possibilities means that it is more likely that you will make sound financial choices when choosing a new automobile. Decide what kind of car best fits your needs while keeping monthly payments within your budget. Do not select a vehicle that forces you to overextend yourself financially.

 

Find the Best Financing

 

First, become an informed consumer by requesting and checking your credit report before speaking with a lender. Correct any errors, since a difference of even a few points can change the APR for your loan. Then, become familiar with competitive interest rates. An informed consumer is in a much better position to receive favorable loan terms than someone who has not done any preparation.

 

Bad credit car loans are available to many people who thought they had no hope of finding a way to purchase an automobile. By doing a little groundwork, you should be able to come away with a loan and a vehicle that work for you.

Pay Your Car Loan Off Faster with These Tips

You may love driving around in your new car, but the looming thoughts of paying off your car loan can cause some uneasiness. Fortunately, there are some ways you can finish paying for your car loan in a shorter time span. Car loans don’t have to be something you dread. Here are some of helpful tips you can utilize to pay off your loan sooner.

 

Check for Any Penalties

 

The type of car loan you have often determines whether or not you are even eligible to pay your loan off early. You can easily find out if you are eligible to pay your car loan off prematurely by contacting your auto loan provider.

 

Use Extra Money to Pay Off Your Loan

 

One way to reduce the amount you have to pay on your car loan is by using extra paychecks toward your loan. At first, it may be hard to see your extra money going toward your auto loan, but the end reward will make it worth it.

 

Similarly, anytime you get a pay raise or significant tax refund you should start applying that money towards your auto loan.

 

Consider Refinancing

 

If your credit score has improved since you got your car loan, then you may want to consider refinancing to a lower interest rate and loan term. By reducing your interest rate, you will end up paying less in the long run.

 

It’s important to note that simply reducing your interest rate without cutting down the length of your loan won’t make a sizable difference. When you go to the bank to refinance your loan, make sure you try to shorten your loan term.

 

Remember to use these tips the next time you want to pay your car loan off before the loan term ends.  The quicker you pay your car loan off, the more money you will save from high interest rates. Even just applying extra money every so often to your loan can make a big difference.

Benefits of Using a Loan for Your Next Car Purchase

The majority of car buyers finance this major purchase. Given the statistics, it’s likely you will be looking at options for car loans when shopping for a vehicle. There are many benefits to purchasing a vehicle with financing. Here are some top advantages to using a loan to purchase your next car.

 

When you finance a car, you can obtain more vehicle than you may have the cash for. A better car can be safer, more reliable and save on maintenance and repairs. With financing, you make a down payment, then periodic (usually monthly) payments for the duration of the loan. As opposed to paying straight cash for a car, down payments required when obtaining a loan are usually a small percentage of the price being paid for the vehicle.

 

There is flexibility in terms when financing car. Payments can be made over various lengths of time such as 36, 60 or 72 months. Interest rates that lenders offer are often flexible too, varying with credit score and the desired length of loan.

 

In an economy with low interest rates, your money may be put to better uses than paying cash for a car. Car loans free up that cash so that it may be used for higher interest earning investments, businesses or home purchases.

 

If you have poor credit or little credit history, financing an automobile may look less attractive. Higher rates are charged to those with low credit scores due to the increased risk to the lender. With a poor credit score, you may need to put down a larger sum of cash in order to keep the payment affordable. However, when you make consistent on time payments, your loan will help improve your credit score over time.

 

By offering greater flexibility and purchasing power, car loans play a critical part of the automobile purchase process for most.