How to Get the Best Car Loan Rate in Canada
Written by DriveAxis.ca May 24, 2023
A car loan is considered to be the second-largest expense a person can take on next to a house, and for that reason, it’s good to understand how they work, what the rates are, and how to negotiate your way into a lower bracket whenever possible. Doing so will allow you to attain the car you want the most, without having to shell out thousands of dollars unnecessarily.
Understanding the facets of a car loan is the biggest hurdle many face, since there are so many components to take into account. However, a quick crash course can help get you on the track so you’ll be prepared when it comes time to purchase a new car. That way, you’ll be able to take advantage of an interest rate that won’t break the bank.
FIXED VS. VARIABLE INTEREST RATES
We’ve all heard the terms “fixed” and “variable” when it comes to interest rates, and they apply to everything from mortgages to electrical bills, and yes, car loans. What exactly is the difference, and which one should you choose? There is no right or wrong answer here, as it’s entirely dependent on which one suits your budget and lifestyle.
Fixed interest rates are just that - a fixed amount you pay every month. For many, this is the more preferable route, since the payments are entirely predictable, thereby making monthly budgeting that much easier. However, it also means that the fixed rate you agreed to when buying your car remains that way throughout the duration of your loan. If the market rate drops, you may find yourself paying more each month, rather than less.
Variable interest rates fluctuate based entirely on market rates, which can soar or plunge depending on a number of different factors. Choosing this route means you’ll be able to take advantage of lower interest rates whenever the market dips, but the reverse holds true if rates go up. Since it’s impossible to predict the future, variable interest rates remain totally unpredictable. However, if your finances are strong, and you aren’t budgeting tightly every month, you may wish to opt for variable interest rates in the hopes that you’ll save some money throughout the duration of your loan.
HOW CAR LOAN INTEREST RATES ARE CALCULATED
Unfortunately, there’s no a la carte approach to auto interest rates, as these are driven largely by market conditions. However, that doesn’t mean you don’t possess a degree of control over the interest rate you’ll get when you buy a car. You are solely responsible for the condition of several factors that could lead to higher interest rates, or lower, depending on your choices.
For instance, your credit score and history are vital when trying to secure a lower interest rate. It certainly won’t be the sole deciding factor, but they can knock some money off your monthly car payments. There’s also the down payment to consider. Putting down a small amount at the onset may mean higher interest rates, while opting for a larger down payment can vastly reduce the duration of your loan, and in turn, lower overall interest payments. Other factors such as the age and condition of the car you’re interested in, as well as vehicle price will also factor into the final interest rate.
While it is true that buying a new car means taking advantage of a lower interest rate, those savings tend to be nullified by the premium attached to the price of the vehicle. Therefore, choosing a quality pre-owned vehicle may be the more attractive option, even if interest rates are considered higher.
PRE-OWNED VEHICLE INTEREST RATES
There is no one-trick solution for lower interest rates when it comes to pre-owned vehicles, but there often doesn’t need to be. Pre-owned cars come with a lower sticker price right out of the gate, which can represent thousands of dollars in savings, even if the car is only a few years old. Similarly, you can choose a car with lower mileage to drop your interest rate a bit more. Here at DriveAxis, our inventory consists of quality pre-owned vehicles designed to keep interest rates as low as possible, while providing drivers with peace of mind when it comes to quality and reliability.
POST-PURCHASE INTEREST RATE OPTIONS
So, you’ve purchased your vehicle, and now you’re wondering if you’re locked into your current interest rate. After all, with everything you’ve already read, you must be thinking whether you have options. Thankfully, you do. Refinancing is often an option for people who want to change the structure of their car loan payments. This is done by refinancing the remaining amount of the car loan so that you can get a lower interest rate.
Another option is simply to speed up the frequency of your payments, and/or pay more than is required. This is a great way to whittle down your existing loan, which in turn will reduce the amount of interest you’re paying over a predetermined period of time. Remember that every dollar paid off is a dollar that can’t be gobbled up by interest.
LET DRIVEAXIS HANDLE IT FOR YOU
Now that you understand the ins and outs of car loan interest rates in Canada, you’re probably wondering if you still want to go through the hassle. How about letting DriveAxis do the hard work for you? After all, we handle all of our financing directly in-house, and we guarantee approval across the board, regardless of your credit history. Simply choose the car you’re interested in, and we’ll work out the best interest rate to suit your budget.
DriveAxis remains committed to providing the highest quality pre-owned vehicles to our customers, and we back that up with a rigorous inspection process, a strong warranty, and a financing loan you’re sure to love. Contact us today to get started, and put the peskiness of car loan interest rates behind you!