Edmonton is one of the largest cities in the country both in terms of population and size and Car Financing. As a result, it is no surprise that most residents need a car to get around the city. In fact, there were nearly 712,934 vehicle registrations in Edmonton only in 2020, increasing 1.18% from 704,657 in 2019. According to the latest information available from the Bank of Canada, the current average interest rate on a car loan in Alberta, Canada is 7.66%.
For most Alberta residents, having a car is a requirement for everything from going to work to get groceries. However, many car users in Alberta might not have enough cash to purchase a vehicle straight-up. Thankfully, you don’t have to fret about the situation as there are a variety of lenders available for you to work with in Alberta.
While maintaining a car and keeping it full of gas can sometimes be time-consuming and worrisome, buying a car does not have to be. This is because of the wide availability and ease of getting car loans. Just like a standard loan, a car loan makes it easier to purchase your dream car using many smaller monthly payments, spread out over several years, instead of paying for it in one lump sum.
If you are looking to finance a car in Edmonton, Alberta, you should keep a few things in mind before applying for a car loan.
Here is a guide to car financing in Edmonton that can help you make an informed decision.
- Determine your budget: The first thing you should do is determine how much you can afford to spend on a car. Consider your household income, and expenses, and add to it the cost of car insurance, fuel, registration of vehicle, maintenance, and repairs. All factors add up to the overall expense related to the vehicle. Also, keep an eye on the total cost of the loan. The interest rate is only one thing to look at, you also need to be aware of the term length as well as any other fees that the lender might charge you. Have a budget in mind beforehand and stick to it. Car salesmen are notorious for being very convincing, so make sure to stick to your guns.
- Check your credit score: Your credit score is a key factor that lenders consider when deciding whether to approve your loan application and what interest rate to offer you. Check your credit score and credit report before applying for a loan. The better your credit, the better your interest rate will be, and the more money you will save. If you want to buy a new car with a car loan, your credit score is traditionally a big piece of the puzzle. Dealerships, for instance, will need to check your credit score to finance a car in your name. Lenders, in turn, will use your credit score to determine the terms of your loan, such as interest rate.
The good news is that today, there is no minimum credit score for a car loan in Canada. However, the lower your score the more limited your options may be. For this reason, it’s a good idea to know what your credit score is before you start shopping around for a new car.
- Shop around for loans: Don’t settle for the first loan offer you receive. Shop around for the best car loan rates and terms. Consider different lenders, including banks, credit unions, and online lenders. Each provider in Alberta will have different interest rates, fees, and options. If you only visit one lender, you are doing yourself a disservice.
- Understand the loan terms: Make sure you understand the loan terms, including the interest rate, loan term, monthly payment, and any fees or charges. Read the loan agreement carefully before signing. The interest rates on your loan will also vary as per your credit rating. Consider this. If your financial health is struggling with low scores, then you can expect to pay interest rates between 8.99% and 29.99% in Edmonton, Alberta. Where you fall in that range can be influenced by several factors. For example, opting for a newer car financing might get you a better rate than an older one. Taking a shorter loan length sometimes decreases the interest rate as well, but make sure you budget for the higher monthly payments.
- Consider a down payment: Making a down payment can reduce the amount you need to borrow and lower your monthly payment. It can also improve your chances of getting approved for a loan and may also incentivize your lender to give you a better interest rate. Some car financing dealerships will let you make a down payment with a credit card, while others only accept traditional forms of payment.
- Get pre-approved: Getting pre-approved for a car financing loan can give you a better of how much you can afford to spend on a car financing and can make the car-buying process smoother. It can also help you negotiate a better price with the dealership. Getting preapproved for a car loan helps you get an understanding of much you can borrow for a car. A car financing loan preapproval can offer you more flexibility to choose which car financing dealer you want to work with and can give you greater negotiating power. You will typically need to provide lenders with a few pieces of personal, financial, and employment information to be considered for an auto loan preapproval. Depending on the lender, you could receive a decision within minutes.
Overall, car financing in Edmonton requires careful planning and research. By understanding your budget, credit score, loan terms, and loan options, we, at The Auto Providers can help you make an informed decision that fits your financial situation and helps you get behind the wheel of your dream car.