Car Loan Financing Full guide in Ontario and Canada | Toronto
Posted on August 15, 2018
Here at Team Chrysler, we’ve helped many customers in Toronto, Oakville, Mississauga and Brampton to decide which type of car purchase works best for them. Leasing, financing or paying cash in full are the three main options. Financing decisions can be the more confusing part of buying a car, a little less “fun” than the test drive but no less important when it comes to matching the right car and driver. Read on for tips on how to determine which leasing or financing options would work best for you.
Leasing a Car in Ontario
Leasing is basically an agreement you make to have the use of a specific car for a set period of time. There is a set monthly payment, and the insurance and maintenance of the vehicle are your responsibility. At the end of the lease period, you can either decide to buy the car outright, or return it to the dealer and opt to lease a different car.
Some people wouldn’t dream of doing anything BUT lease a car. That’s because some of the perks of leasing really work for certain lifestyles. Number one: lower monthly payments. Pay only for the depreciation in value of the car, not its full value. Secondly: lease agreements are seldom as lengthy as car financing agreements. Thirdly, and this one’s important for many people: newer cars on a regular basis. You can enjoy that new car smell every time you lease another vehicle!
Leasing does come with a few restrictions and associated penalties if you don’t follow the rules. One restriction that isn’t workable for everyone is an annual limit on how many kilometres you can drive. Want out of your lease before the agreed-upon end date? You’ll pay penalty fees to do so. Also problematic for some drivers: you cannot lease a used car.
Financing is a loan obtained directly from a bank, dealership, or credit union. You agree to pay the full value of the car, negotiate the length of time required to pay off the loan, interest rate and monthly payments. Example, if a car costs $12,000, and you only have $5,000 that you can pay up front, the rest is financed with a loan for $7000, with interest spread out over monthly payments till the loan is paid out in full.
There are benefits to financing: No restrictions mean you can drive that vehicle as much as you desire. You can customize it, modify it and it’s yours to paint pink with purple polka dots if you want to. If you decide to pay off the loan early, awesome, no penalties for doing so. Lastly, you can get a car loan for used vehicles, too. You can also resell the vehicle to pay off the loan early if you so desire.
No/Bad Credit Loans
Hey, we’re not all in the best shape when it comes to credit, and some of us are just starting out, with no real credit history to speak of. Should that stand between you and your need for a reliable vehicle? No way. Loans do exist for drivers with no credit or a rough credit history. Not everyone can lease or finance a vehicle, whether because of past bankruptcies and other financial snags, or as new Canadians who just immigrated, with no Ontario credit history to speak of. When dealerships check your credit history and rating, folks in either the bad or no credit zone look risky.
You have two choices if either of these scenarios apply to you. Option A: You can establish or improve your credit score by opening bank accounts, getting a credit card and making regular payments, or by taking out a smaller loan and making all payments in full and on time. If you absolutely need a car right away, go for Option B: find a company that offers “subprime” leases and loans. Although these loans and leases have more restrictions and higher interest payments, good financial companies do try to work to help you acquire a vehicle that you can realistically afford.
To Lease, Finance or Pay Cash For a Vehicle?
Consider the benefits and the drawbacks before you decide whether to lease or buy. Leasing, financing, or paying cash in full are the three options car buyers in Ontario have. The cash in full option seems ideal, but it too has some drawbacks, believe it or not. Sure, you pay less interest and you don’t have a monthly car payment to budget for. No penalty fees for how you use it, what you do to customize it, it’s all yours. You can drive it to the Grand Canyon three times a year if you want to. (Tempting, we know.) The downside is (and this affects quite a few of us): the need for quite a bit of cash in hand, up front.
Summary of Options
Driving a minimal to moderate amount, love new cars, keen for a lower monthly payment, with no fantasies about adding modifications that would incur penalty charges? Leasing might be your best money-saving bet. Have some of the money—but not all of the money—required to pay for the vehicle, and concerned you might drive a lot more than your pal who leases? Consider financing options through your dealership, bank, or credit union. Flush with cash and really not into monthly payments or interest charges? Cash in full purchases are your friend.
Who can I discuss car purchase options with in Mississauga?
is always happy to sit down with you and discuss the best car purchase options available to you.
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