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A car loan is a type of financing used specifically to purchase a new or used car. After buying the car, you’ll make monthly payments of both principal and interest until the loan is fully paid off. Auto loans are usually secured loans — the car itself is used as collateral and can be repossessed if you don’t make payments.
How much you can borrow and what interest rate you get depends on the lender and your personal financial situation. The best way to ensure you’re getting the best deal available to you is to compare offers from multiple lenders before signing on to any car loan.
When it comes to how much you’ll pay for auto financing, you need to factor in both ongoing costs built into the loan and upfront costs. These are going to include:
In addition to APR, the length of your loan term also affects the overall cost. Your loan term is the amount of time you have to pay off your loan. A short loan term generally results in higher monthly payments, but a lower total loan cost. A longer loan term gives you lower monthly payments, though you’ll ultimately pay more in interest.
After your APR and term, you’ll want to pay attention to how much you’ll have to pay up front and in taxes:
If you’re financing with a dealer, ask about any cashback discounts to avoid leaving money on the table. Three main types include cash rebates, low-interest dealership financing and special leases. Government rebates for low-emission or hybrid vehicles are also available in many states.
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Since July 2016, Canada has owed on average $2.8 billion per year in car loans, with lenders advancing $4.1 billion in July of 2020. Find out more about the state of car loans in Canada.
How we compare and rank car loans here at Finder Canada.
How we compare and rank business loans here at Finder Canada.
How we compare and rank personal loans here at Finder Canada.
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goPeer is Canada’s first consumer P2P lending platform, connecting Canadians looking for a personal loan with Canadians looking to invest.
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