Smart Strategies on How to Finance a Used Car
Smart Strategies on How to Finance a Used Car
Posted on May 29, 2024
Figuring out how to finance a used car can be overwhelming. For first time buyers especially, it's not always clear. At Sunridge Auto, we help used car customers finance everything from almost newer to fair condition used vehicles.
It's actually a manageable journey when you take the right steps to navigate your financing options and land a loan that suits your financial situation. This article sets out to create your roadmap to selecting lenders, understanding loan terms, and finalizing a financed car deal.
Used Car Financing Checklist
There are several financing options for used cars including bank loans, credit union loans, dealership financing, and online lenders, some with unique benefits like pre-approval and promotional deals. We recommend financing just off the lot with used auto centres like ourselves, and we'll explain why!
Documents You Should Have Handy
- Alberta Driver’s License: Essential as a form of government identification and driving your newer used car off the lot!
- Employment Documentation: Records of your paystubs for potential credit assessments.
- Proof of Insurance: Once you've made up your mind on the vehicle you want and got pre-approved for financing, you will need proof of insurance for your new vehicle.
Auto Loan Requirements for Albertans
- Financial Factors: Your credit score, income, and down payment all paint a need-to-know picture for the lender behind your car loan. Get your credit checked as a first step!
- Down Payment Strategy: A higher down payment of 20% saves you money in the long term.
- Find a Reputable Lender: Make sure you choose a reliable lender that you trust, that will be willing to answer all your questions about auto financing.
Process After Preapproval
- Researching a Used Vehicle: Look into available information on the make, model, and year, and get a vehicle inspection; you can also just let our sales advisors guide your through the process.
- Set Your Budget Based on our available used vehicle inventory, set your mind on what you want to pay upfront and what you can do monthly.
- Trade in what you can: Lower your payments by trading your used vehicle in, for a newer used upgrade!
Understanding Used Car Financing Options
Used vehicles financing is a key part of what we do at Sunridge Auto! When you come to our lot, you can get the financing part out of the way with us soon after you select the vehicle you love most.
Whether you go through our used car sales centre or banks and credit unions you've got options for lenders who can help you get into the used vehicle of your choice. There's also the digital world of online lenders making car loans something you can pursue off the lot or away from your bank. Here are some financing options to explore, each one comes with its own advantages and drawbacks.
Dealership & Used Auto Centres' Financing
To get our customers into the car they deserve, we lean on our careful business relationships with lenders to get favourable and reliable financing for all parties involved. We can even accept financing deals when credit is not within the perfect range.
Benefits of Used Car Loans from Dealers Like Sunridge Auto
If you’re all for simplicity and convenience, our car lots are a stone's throw away from Finance. Imagine walking onto our used car lot, choosing your desired vehicle, and getting loan application submissions to multiple, trusted lenders done while you sip on a coffee—all in one place! The time and effort saved are simply unmatched.
At Sunridge Auto, we're the type of used auto sellers sometimes providing financing deals, such as promotional interest rates for select used car models. These deals, when available, can lead to significant savings, making your car purchase decision well worth the cost of financing.
Even if there's no promotion on, you can still get a fair rate on your used vehicle purchase; we're people just like you and you can always talk to us to get a competitive rate that works for everyone.
Online Lenders
In the digital age, online lenders, some of whom are our partners, also appear auto financing industry. Some work through (albeit impersonal) digital applications, automated approval processes, and algorithmic interest rates.
But online shopping has its drawbacks; if you shop around a lot for car loans, multiple times in periods more than 14-45 days apart, it counts as multiple credit inquiries, which can also negatively affect your credit score.
When opting for online lenders, always consider the lender’s credibility and the security of the loan process. Some lending terms may require secured credit, meaning it's backed by some asset you have—from a cash account to property.
It’s all about finding that perfect blend of convenience, lower costs, and trust. For some, secured credit can be a hassle, however. In that case, you may want to look at other options.
Banks and Credit Unions
Terms and conditions for used vehicles financing are things to consider! Banks an credit unions can be easy to work with depending on your credit score and other factors.
When it comes to car financing, banks and credit unions can help. They may improve your chance of getting other things financed if you reliably pay off your car.
A bank can also help if you're purchasing from a private party! But you'll have to spend time liaising with an institution and the seller of your vehicle. As a dealership, Sunridge Auto doesn't have this back and forth; we can coordinate between sales and finance departments without making you the go-between.
Disadvantages to Financing Cars Through Banks and Credit Unions
Depending on your situation, banks often have fairly high interest rates as well—and negotiation on interest rates with car loans is harder to do with a bank than it is with a used car centre like ourselves. A bank can certainly offer several rates, but they're not as agile—and a fair rate you're looking for might not be approved, often with little to no explanation.
Ask one of our Sunridge Auto finance department for help exploring your options, and feel free to ask them their expert opinions on banks, credit unions, online lenders and dealers!
Preparing for Your Used Car Loan Application
One question our sales advisors often get right out of the gate concerns used car loan applications. That's where the handy checklist we gave at the top comes into play!
Once you've got the numbers from your lender quoted, it's time to lay the groundwork. You may need to improve your credit scores, research vehicle values, and save up for a down payment. Getting pre-approved for a car loan from used automotive sellers, dealerships, online lenders, banks, or credit unions:
- Simplifies the car-buying process
- Increases your negotiating power
- Provides a clear budget for your car purchase
- Helps you build credit
As for us, we're happy to work with banks, credit unions, and private lenders in our own network when we prepare your used car loan.
Improve Your Credit Score
When it comes to applying for a used car loan, your credit score is doing well. Equifax is a great resource if you need a free credit check. Start goalsetting for that 700-750 range as soon as possible if you're in the mid or lower ranges! We work with Equifax to make a quick credit check easily accessible.
You can also look into ways to report and dispute any errors negatively impacting your score. But don’t stop there. Paying off bills on time, maintaining a 30%-or-less credit utilization ratio, and managing your credit limits can all contribute to boosting your credit score.
Try to show lenders of your choice that you’re a responsible borrower and, in return, you can get the best possible qualification for your auto loan. If you're in the 661-780 range, you can get a more competitive APR as advertised!
Research Vehicle Values
Used vehicles often require a little research. Check out our inventory at Sunridge Auto! We can tell you about each vehicle in our inventory because we've vetted each trade-in and each one we've bought outright.
Before you set out on your car buying journey, you’ll need to do some homework. In our opinion this is the fun part. Start researching the market value of the used car you have in mind, and feel free to ask a sales advisor at Sunridge Auto for key details. Browse the best used car brands we've noted for ideas!
You can also brush up on reputable sources like Canadian Black Book or the internationally authoritative Kelley Blue Book (KBB) make this task a breeze. Having a clear understanding of the used car’s depreciation can help you understand the worth of a vehicle by its mileage—so you and Sales can agree.
Save for a Down Payment
Last, but certainly not least, on our preparation checklist is saving for a down payment. Aiming to put at least 20% down on a used car can contribute to a successful repayment—and mapping it out is all part of the financing plan. Here's where a useful tool like a car payment calculator can help.
Establishing a budget and managing existing debts effectively are key to save money for a down payment. When you decrease the monthly payment of a used car loan, you’re ensuring a smoother, more enjoyable ride in your personal finance journey.
Tips for a Smoother Used Car Purchase
Now that you’re all prepped for your used car loan application, you can focus on making your used car purchase smoother. You can also think of it like an investment; a truck that can serve in a contracting role, higher prices help you earn more.
Some things that you can do at this stage ensure it's all worth it; the used car in your sights must be sure to last you during the repayment period—and hopefully far beyond that. It's useful to know everything you need to look for when you're buying a newer used car—and the article's ordered steps to get you there!
- Stock-take on the value of pre-owned vehicles
- Research vehicles you want
- Go for a test drive
- Review vehicle history reports
- Get a professional inspection
- Close the deal
- Secure financing
Remember, when it comes to buying a used car, the overall purchase price is what impacts the total cost and interest of the financing. So, rather than getting fixated on the monthly payment, the overall purchase price becomes priority one—as it's the principal to be repaid.
Review Vehicle History Reports
Used vehicles can really benefit from a vehicle history check! Carfax is one option, or you can ask us at our used vehicle lot about the history of our select inventory.
At Sunridge Auto, we ensure that our inventory is something that you want to buy just as much as we want to sell; building trust with customers starts with vehicle history reports. Every car we buy and then sell undergoes a check to make sure there's no lien on it. When you finance a used car, it should have clear title!
Being aware of past incidents, such as major accidents or damage, its status as active or rebuild, and more is important; these factors can significantly affect the car’s value and result in additional future costs. Plus, checking for past recalls on a vehicle may affect price—and therefore financing.
Additional Fees and Costs
When financing a used car, don’t forget to consider the additional fees and costs associated with auto loans. These can include common charges like documentation fees and origination fees, typically associated with auto loans from banks and credit unions. Don't forget to find out your insurance premium, as some vehicle coverage can be more expensive. And consider maintenance costs for the new vehicle.
These things contribute to the total cost of the car loan and can affect the overall affordability of the vehicle purchase. To ensure a transparent and financially sound purchase, make sure to account for all additional fees in your budgeting.
Test Drive the Value of Pre-Owned Vehicles
Used vehicles demand a test dive! The best used vehicle purchase experience starts and ends at Sunridge Auto. When you come to our lot, you can get the financing part out of the way right afterwards.
Have you considered financing pre-owned vehicles before today? Not all used cars are under $10K. Even used cars under $20K might not meet your particular needs and lifestyle. When you buy newer used, you buy quality, and that might be where you find you need a used car loan. That quality often translates to a smoother test drive!
Ask Us for Inventory Still Under OEM Warranty
Vehicles that are one to three (and sometimes five) years old and pre-owned are likely still under the manufacturer’s warranty, solidifying your newer used car with original equipment manufacturer (OEM) guarantees. Ask about financing our used vehicles inventory that's still under warranty! When you settle on a warrantied vehicle the price is often worth it.
Get Started on the Used Car Financing Journey with Sunridge Auto
You can improve your credit score before applying for a used car loan by cleaning up your credit score, paying bills on time, and maintaining a low credit utilization ratio.
From understanding your financing options to preparing for your loan application, closing the deal, and considering additional costs, you’re ready to finance a used car.
And there you have it! You’re now equipped with the knowledge and strategies to navigate the landscape of used car financing with confidence. If you're new to financing, there's now a lot less to learn from experience.
Take care with each step you take in this process; the journey is just as important as the destination. And always contact us to apply for loan preapproval or to explore our inventory for a vehicle you've just researched!
Frequently Asked Questions
Can you finance a used car?
Yes, you can finance a used car through onsite used car sellers' financing options or through other sources, despite credit history or bankruptcy. Talk to our finance department after you use our free credit check and car loan calculator!
Why should I consider dealership financing?
Sunridge Auto financing is best because it simplifies the loan application process and may come with promotional financing deals (as available). The process saves you time and often yields a fair rate. It's the most convenient option to explore!
How can I improve my credit score before applying for a used car loan?
You can improve your credit score before applying for a used car loan by cleaning up your credit score, paying bills on time, and maintaining a low credit utilization ratio. These general pointers can help boost your credit score.
Why is it important to get a vehicle history report?
It's important to get a vehicle history report because it provides essential information about a car's maintenance history and any potential issues, which can help you make a well-informed purchase decision. But our business as used car sellers involves getting inventory that has this included in the transfer of ownership.
Can newcomers to Canada get car loans?
Newcomers in Alberta have options for car financing, even as they're still building their local credit history. Sunridge Auto collaborates with lenders experienced in assisting newcomers, ensuring fair access to vehicle loans to newcomers to Canada. And we can give tips based on what we've done for others too!