The Ultimate Guide to Car Loans In 2019

The Ultimate Guide to Car Loans In 2019

One of the best feelings that anyone can get is by owning a car. Not only does it give you a sense of ownership, but it also allows to get around town conveniently. You no longer have to stress about finding public transport to get to work or any other place you need to be. Instead, you can drive around in a shiny car with your family to reach your destination.

While buying a car can add convenience to your life, its acquisition can often be a confusing and hectic process. Not only do you need to pick a car best suited to your needs, but you also need to save up a decent amount of money to make the purchase. However, the second part is made easy by car loans.

With a car loan, you only need to pay a small percentage of the total value of the car to own it. The rest of the money comes from the lender. If you’re not sure how to go about getting a car loan, then this car loan guide will provide you with all the details that you need to know. So, without any further ado, let’s start the ultimate guide to car loans in 2019.

The Different Types of Car Financing Available to You

Man kneeling down in front of a car illustration

One of the most important practical and financial decisions that you will make in your life is buying a car. Since it is difficult for most people to pay the entire amount of the car upfront, dealers offer them several financing options. This is to make the car purchase both accessible and affordable for such people. Often, car financing includes bad-credit-car loans.

However, another reason that the dealers offer the financing options is to increase their own profit margins. Therefore, you will need to understand all the options available to you in order to make the best choice. The good news is that most people can find a financing option that suits their needs and budget. Following are the different types of car financing options available in 2019. Once you understand all the nitty-gritty of the different car financing options, you will be in a good position to pick the right car financing option for yourself.

1. Dealer Financing

The first financing option that you have to buy a car is dealer financing. Generally, there are three types of financing options offered by dealers. These include:

⬤    Hire purchases

⬤    Contract hires or personal leasing

⬤    Personal contract purchases

The above dealer financing options are the standard for car purchases. There are several advantages of these dealer financing options. However, there are also drawbacks. So, pay careful attention to what you’re being offered by the dealer before you agree to the financing.

2. Personal Contract Purchases

This type of car financing typically involves deposit a lump sum to open the agreement. Another lump sum payment is also needed to close the purchase. When you opt for personal contract purchases, you agree to pay a pre-determined number of monthly payments over the contract’s duration between the lump sums that you’ll have to deposit.

In addition to the above, you will have the option to return the vehicle after the payment of the monthly installments. You can also sell the car to pay the loan balance that remains. Minimum guaranteed future values (MGFVs) is what the personal contract purchases are based on. What does this mean? It means that the worth of the car at the contract’s end will be set by the dealer. This is as long as you make sure to maintain the car according to the contract’s conditions.

Typically, the conditions or stipulations include maintaining the vehicle’s condition over time and maximum mileage. Thinking about the car’s value at the end of the contract is extremely important because you won’t have ownership of the car until the completion of the contract and payments.

For this reason, personal contract purchases are a good option only if you plan to purchase a new vehicle after a few years. However, if you plan to keep the car long-term, then this car financing option is not a good choice. In other words, it is less financially feasible than other car finance plans. This is especially true if you are looking for bad-credit-car loans.

3. Personal Leasing

In some ways, this car financing option is similar to personal leasing.  Personal leasing requires you to make monthly payments and upfront deposits. Additionally, this car financing option put limitations on your car maintenance and mileage requirements. However, you do not need to but the vehicle at the end of the loan’s term. Instead, you can trade it in for another vehicle.

The costs of this car financing plan are determined by the limits that you agree to and the duration of the lease. At the lease’s beginning, it is common for borrowers to pay three months’ worth of payments. However, service benefits are involved in many personal leases. This allows borrowers to handle the car as per the requirements of the contract. Personal leasing is a good car financing option for those who are not interested in owning a vehicle or don’t want the hassle of maintaining it.

4. Independent Financing Plans

In addition to dealership car financing options, you can also buy a car through independent financing plans. You can buy the car through a mortgage, a personal loan, or a credit card if you are unable to buy the car outright with cash. Since many car buyers do not have enough funds to cover a vehicle purchase on their own, they turn to the above-mentioned alternatives to buy a car. All these independent financing plans have their advantages as well as their drawbacks.

5. Personal Loans

With personal loans, you can borrow large amounts of money to make an expensive purchase such as a car. After you acquire the loan, you can simply pay the entire cost of the car to the dealer to secure ownership of the vehicle. You will then have to pay back the borrowed amount to the lender over a fixed period of time.

There are a few benefits of buying a car with a personal loan. The biggest of them is that you do not need to make a hefty down payment up front to buy the car. So, you don’t have to worry about saving enough money to make the down payment for the car. Additionally, you will have a variety of options available to you that will allow you to set a timeframe for the repayment of the loan.

However, personal loans are not a good option for you to buy a car if you have a credit score that needs work. If you have bad credit, then you’ll be better off looking for bad-credit-car loans. The credit requirement is not the only drawback of buying a car with a personal loan. You may also need to incur several additional fees and charges associated with the loan. This can make the loan expensive or unaffordable.

These are all the options you have to finance the purchase of a car. While most people want a new car, it could be worthwhile to explore the option of financing a used car. How can you finance a used car in Canada? Let’s find out.

Financing a Used Car in Canada

 Young woman driving off in a used car bought from a dealership

In Canada, not everyone can afford a new car. This is regardless of whether they buy the car outright with cash or finance the purchase with a car loan. Therefore, the purchase of used cars has become increasingly common in Canada in recent times. Many of these purchases are made with a car loan. There are two main ways for Canadians to secure a loan to finance a used car: a loan through the car dealership or directly from a lender.

Each of these financing options has its advantages and drawbacks. Therefore, the right car financing option for you will depend on several different factors. Typically, your credit score determines your eligibility for the loan and the interest rates you qualify for. Often, a bad credit score results in the applicant getting rejected for the loan.

However, the good news is that there are bad-credit-car loans available today that increase your chances of getting approved for a car loan.  If you’re interested in financing a used car, then following are the steps you need to follow to get a loan for a used car:

1. Assess Your Budget

The first thing that you would want to do when looking to finance a used car purchase is assessing your budget. You need to do this before you head to the car dealership or a lender. Assessing your budget will allow you to know whether you can afford the car loan or not.

When assessing your budget, the two important costs that you need to consider are the loan’s down payment and the monthly payments. You may also want to consider the cost of insurance, repairs, etc. Even when you’re buying a used car, you must factor in the cost of the down payment. This will serve you well during the payment period.

2. Understand Your Budget

Once you have developed a budget plan, you should develop an understanding of the figures in your budget to work out how much you can realistically afford to pay for the car loan. This includes finding out how long it will take you to pay back the loan with the budget you have worked out. You should also determine the timeframe you want the loan to be paid off by as well as the amount you can afford to pay. A key factor in your ability to appropriately repay the loan is the loan’s duration.

3. Apply for the Loan

There will be several key decisions to make when it is finally time to apply for the loan. The importance of these decisions will be deciding where to apply for the loan. This can be a tough task, to say the least. This is especially true if you have little idea about where to look. Usually, people would go to a financial institution or a car dealership for the loan.

However, your range of loan features can be limited when you consider only these two options for the car loan. Also, it can be hard to get a loan from these lenders if you have poor credit. An alternative to the car dealership and financial institutions are car loan providers that allow people from diverse financial backgrounds to secure a car loan.

People with bad credit are unlikely to get approved for the car loan by the traditional lenders; they can secure a car loan from these car loan providers. This is because these car loan providers offer bad-credit-car loans. With these car loan providers, people have a range of car financing options available to them and they can choose the option that suits them best.

Choosing the Right Car Financing Option for Your Needs

With so many car financing options available today, it can be difficult to choose an option that best meets your needs and budget. This is because each financing options has its advantages and drawbacks. Additionally, the preferences of people in paying off their loans vary. Often, the choice will depend on the financial situation of the individual borrower.

If you have a good credit score, then it wouldn’t be a bad idea to get the car loan from a financial institution or through a dealership. However, if your credit score is poor or less than favorable, then you may want to explore other alternatives. This includes car loan providers that offer a car loan to people with bad credits.

Another reason to get a loan from these car loan providers is that often banks and car dealerships have hidden costs that only reveal after you start to repay the loan. On the other hand, the car loan providers are transparent about all the costs involved in the repayment of the loan.

Therefore, it is extremely important that you know everything that you’ll be getting yourself into before you agree to the loan. A car is a big responsibility and you can fulfill this responsibility by paying attention to everything that has been said in this ultimate guide to car loans in 2019.

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