Sep 30, 2022
5 min. read
If you’re purchasing a new or used vehicle, it’s important to know how you’ll finance it, what financing a vehicle purchase may look like for you, and the associated risks.
To ensure a smooth transaction, here are a few ways to protect yourself and gain a better understanding of risks related to car loans—plus a few do’s and don’ts to secure a good deal.
Know your buying power
Consumers with better credit scores often receive lower interest rates. Before you head to a dealership, visit your financial institution to review your unique situation. An advisor can help provide some insight into your credit rating and what rates you might expect to be eligible to receive.
When asking for a loan, the dealership may want to send your application and information to several lenders or financial institutions, so you could be approved by multiple lenders, each with different terms and interest rates. Ask what each one offers and consider payments that fit your budget before agreeing to submit your application.
But be wary! Submitting multiple loan applications can negatively impact your credit score. Let the dealership know if you don’t want your credit checked by multiple lenders. To protect yourself, keep track of each application submitted by the dealer.
Consider contract terms and length
Before signing on the dotted line, carefully consider interest rates and financing options to ensure you get the best possible rate and terms.
While a low monthly payment is attractive, look at the bigger picture. Some lenders offer a low monthly payment by signing you up for a long-term contract. Though this may be easier on your wallet, consider whether you’ll be trading in your vehicle before your loan is paid off. If you think you will, then you could be putting yourself at risk of incurring negative equity down the road.
Check the application
Verify the accuracy of information provided on your credit application before it’s signed and submitted. Request a copy of the loan application for your records.
If a dealer makes a verbal promise, ensure it always appears in writing on the bill of sale. Walk away if you notice errors or misrepresentations on your finance application that the dealership refuses to correct or if they suggest you may not be approved for a loan if the information is corrected for accuracy.
Being an informed consumer will help you avoid some of the serious risks associated with an auto loan. Fortunately, OMVIC’s team of experts are there to support you throughout the car-buying process by answering your questions about vehicle financing and interest rates.
Shop with confidence
Visit OMVIC.ca to access free car-buying resources to get you started, and sign up for the monthly newsletter, Consumer Line. You can also contact OMVIC’s consumer support team at consumers@omvic.on.ca or 1-800-943-6002 for expert advice and answers to all your car buying questions.
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