Are Car Loans Sales Promotions Legal in Canada?
Like all bargain offers and special offers, car loan promotions should be explored carefully before jumping in. The vehicle financing experts at Laneway Auto Loans & Sales some of the points that prudent buyers should watch, when looking for a new car in Atlantic Canada.
Marketing Tricks or Heaven-sent Solutions?
When browsing the Internet in search of the perfect car at an affordable price, buyers are often tempted by countless special offers that are hard to resist. Let’s take a look at the facts and figures behind these blaring headlines.
Yes, zero percent car loans are available in Canada, although reserved almost exclusively for buyers with excellent credit ratings interested in new models. However, as few prospects meet these criteria, this is often a make-and-switch tactic that draws hopeful borrowers into the sales centre. Once you’re actually on site, there’s a reasonable chance you’ll find a car you like, and – since you’re there already, and sick of looking around – you’ll sign up for financing on less generous terms. As always, making a large down payment (try for 20%) weighs in your favour when handling over interest rates.
Inside tip: Zero interest loan options are often arrangements between auto manufacturers and dealers, especially on slower-selling models. This means that there could well be other benefits available, like trim upgrades, winter tyres, or even healthy discounts.
Zero Down Payment!
This sounds like a great option, especially for cash-strapped buyers who need wheels but on tight budgets. However, lenders like down payments as they ease the financial risk of you defaulting on a loan, particularly when it’s underwater, when the value of your repossessed and ageing vehicle is less than the outstanding amount on your loan.
Inside tip: The best way of getting an auto loan approved with no down payment is to have a good credit score, and pick a modest vehicle that is well within your budget. This reassures cautious lenders that you will be able to keep up with your repayment schedule.
Cash Back Car Loans!
Cash Back Car Loans! The idea sounds great – extra cash to get you through a credit crunch, like home renovations or medical bills. However, it’s still a loan, and you’ll be paying interest on it for years to come.
Inside tip: Unless you have higher interest debt you could pay off, cashback car loans make little financial sense over the longer term.
No Credit Checks!
Think about this for a moment – why would a lender risk losing many thousand dollars to an unknown buyer (like yourself), without knowing if you are able to repay your loan. Banks, credit unions, and dealerships are businesses, not charities, and they’ll always protect their own interests. If they waive the protection provided by a credit check, they’ll seek other safeguards, often through extremely high interest rates or fees that are far steeper than normal. Bad credit buyers are often willing to accept excessively expensive terms, particularly as this can be the first step back to fiscal rehabilitation.
Inside tip: Loans granted without the usual credit checks may include unpleasant surprises in the small print, like stiff penalties and unusually stringent repayment requirements, with exorbitant fees.
How can a lender guarantee approval of a loan, without knowing the financial status of the borrower. Similar to financing without credit checks, lenders will always protect themselves against unknown risks. These defenses against default include extremely high interest rates (15% is not unknown), additional charges, and other conditions ranging from collateral to co-signers.
Inside tip: Guaranteed approval means guaranteed price hikes in the end-cost of your vehicle, established through complex legal language that may lock you into a deal that is bad for your long-term financial health.
Remember: Before signing up for what sounds like invitingly free money, check the financial aspects with a Laneway Auto Loans & Sales consultant. They’ll tell you if it sounds too good to be true, so it probably is.