Buying a used car can be a very smart purchase, saving you significant money, while still providing you a reliable vehicle. While it is common for people to buy used vehicles outright, there are some options available worth considering if you’d rather lease or finance a used car.
Get a Direct Loan
A popular option for financing the purchase of a used vehicle is to get a direct loan from a bank or other financial institution. Before you go and apply for a loan, here are a few tips on how to go about the process.
Get a Copy of Your Credit Report
Before you start the loan process, it is a good idea to know the status of your personal credit score. In order for banks to give you prime rates on a loan, it is ideal to have a credit score of at least 680. The higher your credit score, the better loan terms you’ll receive, and the lower your monthly payments will be. If your credit score is too low, the loan rates you’ll qualify for may be too high to be financially viable for you, and it might make more sense to save up and purchase the car with cash.
Contact Local Banks to Research Rates and Terms
Most lenders will offer 5 year loans if the vehicle you want to purchase is less than 5 years old. Typically if a vehicle is more than 5 years old, lenders offer terms for a 1-2 year loan. It is also common for lenders to have odometer restrictions, requiring the vehicle to have less than 100,000Km to be eligible for financing. Lenders will usually only provide loans for cars purchased through authorized franchise dealerships, not through independent dealers or private parties.
Before you commit to a loan, it is a good idea to call around to your local banks and inquire information about the different loan options they offer. This will save you time, save you money by getting you the best rate, and help you decide if getting a loan is even the right decision for you.
Provide Info about the Car You Want to Finance
When you find the best local bank or lender and you’re ready to go in for your appointment to apply for the loan, arrive prepared by taking the time to compile all the information that your lender will need in order to issue you a loan. This includes all the pertinent details about the used vehicle you want to finance – make, model, year, VIN, number of kilometres, vehicle history report (CarProof), etc. Also, see our FAQ section about how to prepare for a loan appointment.
Get a Dealer Loan
Another option is to finance your used vehicle directly through the dealership you plan to purchase it from. Often times, a dealership will finance any car they sell, regardless of age or odometer reading.
Apply for a Loan Directly Through a Dealership
While dealers will generally finance any car they sell, you can expect slightly higher loan rates for this service. If this worries you, consider applying for a direct loan from a local bank first before you apply for financing through a dealership. However, depending on the vehicle you’re purchasing, a direct bank loan may be out of the question, in which case a loan through your dealership will be the best option.
When you shop for your next used car at Georgetown Toyota, we’ll walk you through the entire process of selecting your vehicle, and obtaining financing through our in house finance department. We know the cars we sell inside and out, which makes obtaining a loan through us very simple and easy.
Research Competitive Interest Rates Based on Your Credit Score
Again, if you want to get the best interest rate you deserve on a loan, it is crucial that you know your own credit score before you apply for a loan. When you know your credit score, you’ll be empowered to know what sort of interest rate and loan terms you qualify for, so you can get the best deal possible.
At Georgetown Toyota, our finance team works hard to deliver our customer the most competitive loan rates available. We work closely with individuals and families with wide ranges of income and credit worthiness, so if you have good credit, bad credit or no credit, it doesn’t matter. We will work with you to find a solution to get you behind the wheel of a quality used car.
Offer a Down Payment in Cash at Least 10% of the Cars Value
To get the best deal on a loan, you will need to make a down payment in cash of at least 10% of the cars value. The more money you can put down, the better rates you’ll get and the lower your monthly payment will be. A 20% down payment is even better. Another option is to trade in your old car as a form of down payment. Either way, providing a decent down payment on the vehicle will both increase your eligibility for loan approval, but also reduce the risk of being “upside down” on your vehicle.