Shopping around for auto-financing
Considerations when shopping around for a car
When you're considering buying a car, it's important to:
- compare prices
- negotiate the price of the car
- consider the total cost of a car and not just the car payments or the interest rate
- understand depreciation and negative equity
- understand the risks associated with long-term car loans
- understand other related costs, such as the price of gas and insurance
Negotiating the details of your loan
If you're considering getting a loan to buy a car, try to negotiate the interest rate. Get quotes from multiple dealers and lenders. You may save money by getting a lower interest rate. You may also be able to negotiate other fees such as dealer administration fees.
You'll need to sign an application for the dealer to provide you with an approval and quote. However, don't sign any other documentation, such as a vehicle sales agreement, until you make your final decision.
While you compare different loan offers from dealers and lenders, look at all the details, including the:
- interest rate
- payment schedule
- financing fees or charges
- total amount that will be financed
- length of the loan
The term of your car loan can have a big impact on your regular payments and on the total cost of the car. The longer the term of the loan, the lower your regular payments. However, you will end up paying more in interest with a longer loan term.
Remember that when you are budgeting for a car, focus on the total cost of the car, not just on your regular payments. The example below shows the total cost of the same car with the same interest rate but different loan lengths.
| Price of the car | Interest rate on the loan | Term of the loan (months) | Cost of the car with interest |
|---|---|---|---|
| $25,000 | 5.00% | 36 | $26,974 |
| $25,000 | 5.00% | 84 | $29,974 |
*This example is for illustrative purposes only. Amounts have been rounded to the nearest dollar.
Dealers and lenders may tell you they can lower your loan payments to fit your budget. But be aware that this usually involves extending the term of the loan, which could mean you end up paying more interest on your loan.
Does a dealer have to offer you the lender's best interest rate
A dealer doesn’t have to offer you the lowest interest rate when showing your different financing options. Ask the dealer to show you multiple offers from different lenders if possible. Compare these offers to see who offers the lowest interest rate.
The interest rate a dealer offers you may be higher than what you could get directly from a financial institution or from a different dealership.
Shop around and negotiate to make sure you get the best deal.
What you should know before signing a contract
In most provinces and territories, there is no "cooling off" period with financing agreements such as car loans and lease agreements. Generally, once you have signed the contract, you are bound by the terms of the agreement.
Check with your provincial or territorial consumer affairs office to see if there is a "cooling off" period for the purchase or lease of a car. Make sure that you’re ready to buy a car before signing any contract.
Never sign a contract with more than one dealership at the same time. You may not be able to get out of either of the contracts once they’re signed.
What you should know about deposits
Dealers may ask for a deposit to hold or order the car you want. They may keep some, or all, of your deposit if you don’t buy the car or decide to buy one somewhere else.
Learn more about deposits from your provincial or territorial vehicle sales regulator.
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