“I want to buy a new car, but … what about financing?”

Spring is finally here! Thoughts of warm, sunny weekends and Sunday drives crowd out memories of shoveling and shocking March snowstorms. Are you picturing that Sunday drive in your new car? Beyond the model, options and colour there is the financial obligation and at the end of the day you want to make sure that you have the best deal.

Lower rate or smaller loan?

No question a new car versus a used car is a more expensive purchase. But purchasing a new car rather than a used car means a lower interest rate. And often an easier time getting a loan. Dependent on the value of the new versus used car you could pay less for the new car in the long run because of the difference in interest. After you have made your purchase and it comes time to insure your car a new car means lower insurance payments. For your lender a new car is “less risky” than a used car.

Is the dealership giving you the gears?

It’s hard to resist a 0% financing offer. For many consumers the lure of an “interest-free” car loan is what gets them onto the dealership lot and from there it can be hard to resist a seasoned salesman’s pitch. This financing is usually limited to specific vehicles the manufacturer is trying to clear out of inventory and may not include the model you have your heart set on. But be aware – one blemish on your credit report means the 0% will quickly disappear and a less competitive rate will appear. If you and your purchase qualify for 0% financing the term of the loan will typically be over 36 months which means you will be making higher loan payments. If you default or are late the dealership will quickly repossess your car. By choosing 0% financing you will not be able to take advantage of cash back or other incentives that can actually mean you pay more for your purchase even including loan interest. If you were going to use a car for its trade-in value make sure you agree on its value before you start on the financing conversation. Remember your salesman is on commission for both the sale and the financing. It is in the dealership’s best interest for you to pay the most on your total purchase including any interest payments.

Before you drive off the lot with a new car …

You have picked the model, the colour, the options and have been given the hard sell on dealer financing – now what? Take a test drive, a breath and the time to call your financial advocate to talk about what all this adds up to. More than a great rate on a new car your financial advocate can give you the real numbers on the offer from the dealership and by completing our Financial Fitness tests your advocate will be able to help you determine what payments best fit into your financial situation. We C.U.™ so you can drive off the lot with the deal best for you and not the dealer.