More Expert Advice on Vehicle Financing
Nov
20
Friday, November 20, 2020
For the last week of Financial Literacy Month, we’re continuing our discussion on vehicle financing with experts from the Automobile Protection Agency (APA). We’re looking at two issues: long-term loans and financing a vehicle if you buy a car privately.
Are long-term loans a good idea?
OMVIC: We recently wrote a blog post on the dangers of loans lasting between five to eight years. If you plan to trade in a vehicle before you pay it off, long-term loans can saddle you with heavy debts. But can taking out a long-term loan ever be a good strategy for buying the car you want?
APA: The shortest-term loan you can afford is always the best choice. Long loans equal increased interest costs. An old car still being financed after seven years may cost a lot in maintenance and repairs that the borrower may not be able to afford.
The Bottom Line: Get the shortest-term loan you can afford. Need a refresher on the dangers of long-term loans and negative equity? Check out our recent blog post “How to Avoid Getting Into Negative Equity”
What should I do if I need financing for a private purchase?
APA: If you're on a very limited budget (below $7,000), a private purchase can be a good solution with a used car shortage and high prices right now.
You can get a pre-arranged personal loan to buy a vehicle. Check with your bank for details.
You should also check out credit unions, which are sometimes more consumer-focused for small loans. A credit union may have some programs specifically for buying a used vehicle.
As always, if you buy privately, do your homework. Get a Carfax and UVIP report before you buy. Getting the vehicle inspected beforehand by a mechanic you trust is a MUST!
The Bottom Line: Check with a bank and a credit union for financing options and do your research!
About OMVIC
As the regulator of motor vehicle sales in Ontario, OMVIC’s mandate is to maintain a fair and informed marketplace by protecting the rights of consumers, enhancing industry professionalism and ensuring fair, honest and open competition for registered motor vehicle dealers. Visit omvic.ca to learn more about your car-buying rights as well as additional tips for buying a car in Ontario.
For car buying tips, check out the OMVIC Academy. You can view other resources such as multilingual videos and download the OMVIC Car-buying Guide
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