For consumers purchasing a new or used vehicle, it's important to consider financing options. For many, buying a car is the second biggest purchase you will make, right after buying a home. Therefore, understanding car financing options, terms, advantages, and disadvantages are crucial for ensuring a smooth purchase.

If you are thinking about a vehicle purchase, carefully consider interest rates and financing options offered, and ensure you get the most advantageous financing terms. Unless otherwise noted, Ontario has no cooling-off period, so once you sign a contract, you have committed to the purchase.

The following information will help you better understand what’s involved when financing a vehicle.

Ensure your credit application information is accurate

You should always verify the accuracy of the information on your credit application before allowing the dealer to submit it. It has been reported that some credit applications have been submitted with inflated incomes or minimized debts to help get approved. In addition to being unethical, this is also illegal.

Before signing a loan application and letting a dealer submit it, make sure you review the information carefully and request a copy for your records.

If a dealership refuses to correct errors or misrepresentations on your application or suggests these corrections will lower your likelihood of being approved, you should walk away. This may be an indication that the dealer is unethical.

Understand the details of who the credit application is being submitted to

Call your financial institution before visiting a dealership to inquire about your credit score and the financing options available. The more information you have before speaking with a salesperson will allow you to "compare shop" for financing.

In the case of dealer-arranged financing, the dealer may submit your loan application to several lenders. Sending a loan application to several lenders will ultimately result in harming your credit score. Specify to the dealer if you do not want your credit to be checked by multiple lenders and ask about the terms and rates offered by each lender before you submit your application in order to protect yourself. Remember to visit omvic.ca for more information on financing and understanding the details of credit applications.

Always carefully review your contract

When presented with your contract, take the time to review all the terms of your agreement, including vehicle pricing and financing details. The agreement is required to include items such as your monthly payment, the frequency of your payment, the terms of your loan, the interest and annual percentage rates as well as the cost of borrowing (the amount it costs you to borrow from the financial institution) and total loan amount. If the dealer can’t provide the finance terms outlined in your contract, you can agree to the new terms, renegotiate, or walk away.

OMVIC is always there to help

Visit omvic.ca to access free car-buying resources to get you started, and sign up for the quarterly newsletter, Consumer Line. You can also contact OMVIC’s consumer support team at consumers@omvic.on.ca or 1-800-943-6002 for expert advice and answers to all your car buying questions.

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