Car financing options

Car loans

If you want to buy a car, one option is to get a loan

There are ​two different ways you can get a loan:

Loans arranged through a dealer

Most dealers will make loan arrangements for you with a lender. You can apply for and receive a loan directly in the dealership.

When you visit a dealership, dealers can arrange financing for you with:​

Loans or lines of credit from a financial institution

You may be able to get a loan or line of credit through your financial institution rather than getting a loan from a dealer.

If you have a strong relationship with your financial institution (for example, you have a bank account, mortgage and/or a credit card that are in good standing), you may be able to negotiate a better interest rate on a loan or line of credit than you could through a dealer.

Car leases

Leasing is similar to a long-term rental. When you lease a car, you make regular payments for the use of the car over a set period of time, typically 3 to 5 years. You are not buying the car and will not own it when the lease ends. However, lease contracts typically give you the option to buy out the car at the end of the lease term.

Leasing is more common for consumers who like to have a new car more often and don't want to sell or trade in their previously purchased car.

Leases are typically arranged through dealers. There are usually conditions and restrictions attached to a lease and it is important that you fully understand what they are before you sign the contract.

Pros of leasing a car

Cons of leasing a car

Rent-to-own plans

Some companies may give you the option of a rent-to-own plan for a car.

Most rent-to-own plans are similar to car leases. You agree to make regular payments for a certain term. You then have the option of returning the car or buying it at the end of that term.

With a car lease, you typically make your payments to a third party financial institution, such as a bank or a credit union. With a rent-to-own plan, you make your payments directly to the dealership or car rental company.

Rent-to-own plans are designed for people with low or no credit. You will typically end up paying more for a car using a rent-to-own plan than if you buy or lease the car through a dealership.

You don’t actually own the car when you sign up for a rent-to-own plan – the rent-to-own company does. This means that they can take the car back, or repossess it, if you miss your payments. You won’t get your money back if the car is repossessed.

Learn more about rent-to-own plans.

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