Shopping around for auto-financing
Things to consider when shopping for a car
If you're considering buying a car, make sure you:
- compare prices
- if possible, negotiate the price of the car
- look at the total cost and not just the payments or 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
Learn more about financial risks when buying a car.
Understanding the terms and conditions of your car loan
If you're considering getting a car loan, make sure you understand the details of the loan. 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. Don't sign any other document, like a vehicle sales agreement, until you make your final decision.
When you compare different car loan offers, look at all the details, including the:
- interest rate
- payment schedule
- financing fees
- total amount that you’ll be financing
- length of the car loan
The term of your car loan may have a big impact on your payments and the total cost of the car. The longer the loan term, the lower your payments. You’ll end up paying more in interest with a longer loan term.
When you’re budgeting for a car, keep in mind the total cost of the car. The example below shows the total cost of a car for different loan terms.
| Price of the car | Loan interest rate | Loan term (months) | Total cost of the car |
|---|---|---|---|
| $25,000 | 5% | 36 | $26,974 |
| $25,000 | 5% | 84 | $29,681 |
Dealers and lenders may tell you that you may lower your car loan payments to fit your budget. Keep in mind that this usually involves extending the term of your car loan. You may end up paying more interest in the end.
Does a dealer have to offer you the best interest rate
A dealer doesn’t have to offer you the lowest interest rate when showing you different financing options. Ask the dealer to show you multiple offers from different lenders if possible. Compare them to see who offers the lowest interest rate.
You may be able to get a lower interest rate directly with a financial institution or different dealership. Shop around and negotiate to make sure you get the best deal.
Things to consider before signing a contract
In most provinces and territories, there’s no "cooling off" period with car loans and lease agreements. A cooling off period means you may cancel the contract without a penalty within a specific period. Check with your provincial or territorial Consumer Affairs office to see if there’s a cooling off period.
Find your provincial and territorial Consumer Affairs office.
Make sure you’re ready to buy a car before signing any contract. Generally, once you’ve signed the contract, you must respect the terms of the agreement. 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 you’ve signed them.
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 decide not to buy the car.
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