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What Pre-approval Means for Car Loans

Car loans can be expensive over the life of your vehicle if you do not plan ahead. High interest rates and long terms will add to the cost of your car over the years. It may be tempting to go straight to the dealer and test drive some vehicles when shopping for a car. Before doing this, consider becoming pre-approved for a loan. Shopping for a loan before shopping for a car will give you a better understanding of your buying power and the overall cost of your potential vehicle.

Preapproval is a preliminary loan application. A potential lender will review your credit, your income, and possibly several other factors. They will then tell you how much they are willing to lend you, what the interest rate on the loan will be, how long you will be expected to make payments on the loan, and if any down payment will be required.

As the borrower, you do not have to commit to accepting the loan at that time. Banks, credit unions, and dealers offer preapproval, so there are several financing options to choose from. Preapproval allows you to shop at all these locations before committing to a loan.

With a good credit score and a large down payment, you may be preapproved for a very large loan. While this may make it tempting to purchase a more expensive vehicle, be careful to not overextend yourself and exceed your monthly budget.

If you are not approved for a large enough loan, preapproval allows you enough time to prepare to compensate for the difference. Consider a larger down payment, a cosigner, or a longer term loan to make your car loan offers more agreeable.

Pre-approval helps you know how much car you can purchase, how long it will take you to pay for that vehicle, and what the long-term costs of the loan will be. Car loans can be intimidating, but pre-approval may make the borrowing process easier to understand.

3 Reasons to Buy a Used Car

If you’ve ever turned on a TV — and chances are you have — you were probably inundated with commercials for shiny new cars for only a single paycheck per month! When your family is in the market for a new car, a used cars service could offer you something just as beautiful as what you see in on the new lot. That’s not the only benefit, either.

Used Cars Are Cheap

It might seem obvious, but used cars are cheaper, and it goes beyond a simple price tag. Perhaps you prefer luxury cars, but could never afford one right off the lot. For what you’d spend on a brand new Toyota, you might be able to find the luxury car of your dreams. Even if you prefer something family-friendly over a sports car, you could save up to 50 percent by purchasing something used.

It Might Be Safer

It seems like a different car recall is in the news every day. Purchasing a new car leaves you vulnerable to undiscovered mechanical issues. If you opt to buy one that is a few years old instead, it’s more likely that any problems were already discovered and fixed, leaving you with peace of mind.

You Don’t Have to Skip the Warranty

Many people worry they’ll end up purchasing a used car that doesn’t run for long, but most dealerships offer certified pre-owned cars. Certified used cars are usually slightly more expensive than traditional used cars, but the certification means the car was professionally inspected and, if it had any problems, was professionally repaired. Certified used cars come with a warranty that ensures you can drive the car for a set amount of years, at least.

If you’ve been trying to decide between purchasing a brand new vehicle or buying a used one, our used cars service could be just what you’re looking for. Whether you need something for the whole family or something to impress your friends on the weekends, we provide a range of vehicles for a wide variety of budgets.

Effective Ways to Lower the Cost of Your Loan

Few things are more exciting than getting a brand new car. That being said, you don’t want to let your excitement blind you to taking steps to reduce your car payment. There are a few strategies we recommend for reducing the overall cost of car loans.

BOOST YOUR CREDIT SCORE

If you’re still a few months away from buying your car, do everything you can to improve your credit score, even if you feel you already have a good score. Every extra point you add helps to minimize you as a risk and maximizes your savings on your loan.

EXTEND THE LENGTH OF YOUR LOAN

You’ll likely have the option of choosing a seven-year car loan. Even if you can pay your car off faster, a longer loan term is a great way to lower your monthly payments. With this fact in mind, know that your longer terms are likely to result in higher interest over the life of your loan. Only you can decide if this sounds like an ideal situation if it means you can easily afford your monthly payment. S

AVE UP A LARGER DOWN PAYMENT

It’s best that you save up as much as possible to cover your initial down payment. The more you save, the less you have to borrow and the lower your monthly payments will be. If this means being saddled with your old wheels for a few extra months, it could very well be worth it in the long run. It’s always best to focus on long-term gains over the short-term sacrifices.

BUY A LESS EXPENSIVE CAR

It’s always best to buy well within your means. While a less expensive car may not be as flashy and luxurious as a top-of-the-line ride, the less expensive car may be better for your future finances. After all, no one wants to spend a majority of their money on a car payment. Do everything you can to lower your car payment as much as possible before signing any documents. A little foresight can save you a lot of money. 

How to Save With Dealer-approved Car Loans

People want to save money on products they buy, and this is most true of products that cost more. Cars are one key example. People certainly are inclined to make any effort to save money on car loans when the overall price can represent such a large sum. Car dealers have access and industry insight that can save people money in the long run. Working with one can potentially save anyone looking for a car a reasonable amount of money.

Preferred Lenders

Dealerships often negotiate car loans through a bank. Because these companies have so much business, they often qualify for special rates at a number of financial institutions. This can be advantageous for many customers looking for a good deal. The connections a dealer has can lead to a better price for consumers. It is important to check with a dealership to find out what sort of options it can provide.

Less Down

People looking for car loans through a dealership could also qualify for less down on competitive rates. It could benefit a person looking for such loan to pay less in the beginning and enjoy good rates such as those that a dealership can provide. Even if the dealership cannot guarantee better rates for less down, it still can offer competitive rates for a potentially smaller amount of money. Working with a dealership can be important for anyone who wants more personalization with his or her car loan.

More Options

Another opportunity a dealership can provide is more options. Dealerships have been selling cars for years, and they can leverage their industry knowledge to create a better end result. A person in such a situation should consider reaching out to the professional service with particular requests.

Anyone looking for car loans should explore his or her options and see how a dealership might be an essential part of owning a new car.

What Preapproval Means for Car Loans

Everyone likes to get a good deal. When you are offered a low monthly payment on your car loan, that might seem like the best deal of all. In the long run, however, that low monthly payment might actually end up costing you hundreds of dollars more than you intended to pay. In order to understand the true total cost of car loans, you must look at three different factors.

Loan Amount

The initial amount you borrow is called the loan principal. The amount of principal you have left at the end of every billing cycle is one half of the equation that determines how much you will pay in interest. To lower the total amount you pay on the entire loan, it is a good idea to start with a lower principal. If you are able to pay 20% of the initial $25,000 cost in a down payment, that is $5000 of the purchase price that never figures into the interest you are charged.

Loan Rate

The other half of the interest equation is the interest rate itself. Bargaining for a lower interest rate can significantly reduce the price you ultimately pay for your next vehicle. A great credit score and other factors, such as dependable income, can lower your risk factors with the lender and thus can result in a lower APR, saving you a great deal of money.

Loan Term

A lower monthly payment might be tempting. When you accept a lower monthly payment, however, you are lengthening the term of your loan, postponing the date when the car will be paid off and costing yourself a lot of money in the process. You will pay significantly less interest with a 2- or 3-year loan term than with a 4-year loan.

When negotiating the terms of car loans, fight the urge to take it easier than your monthly budget can handle. Factor in the amount, rate and term of your loan to get the best deal overall.

How to Finance a Used Car in Canada

If you’ve found the new-to-you car of your dreams but don’t have the cash to pay for it in full, financing is the solution. In this post we’ll go over everything you need to know so you can secure the right kind of auto financing for your vehicle and your bottom line.

How car financing works

Taking out a car loan eliminates the stress of coming up with a large sum of money all at once. However, it also adds another monthly payment to your budget, so it’s important to understand the ins-and-outs of car financing before looking at the different lending options.
Your monthly car loan payments are calculated using three elements: principal, term and interest rate. 
Principal is the total cost of the vehicle, including any fees the lender or dealership may have for the car loan and any add-ons you choose.
Term is the length of time that payments will be made on the loan — typical terms range from 36 months to 72 months.
Interest rate is the percentage the lender is charging you to borrow money. 
Fixed rate loans offer predictability because the interest rate stays the same throughout the term of the loan. If you’re less concerned with fluctuations and want to benefit from times when interest rates are lower, you can opt for a variable rate loan.

Borrowing for new and used cars

New and used cars get treated differently by lenders for a few reasons. For starters, new cars have a higher sticker price than pre-owned cars. While this usually means buyers can cash-in on incentives like rebates or 0% financing for a certain period, it also means loan payment terms will be longer and monthly premiums will be higher. Also, new cars are usually more expensive to insure. 
Used cars, on the other hand, cost less to purchase. They do, however, require more upkeep than new cars and interest rates on pre-owned vehicles are usually higher — especially if you don’t have much for a down payment or have less than stellar credit. 
Check out our post for things to consider when deciding whether to buy a new or used car.

Ways to finance a used car

There are two main ways to secure a car loan in Canada: through a financial institution or directly through a dealership. Each route has its advantages and it’s a good idea to shop around to ensure you’re making the best decision for your financial situation. 
Before applying for any loan, it’s a good idea to check your credit rating and determine your budget. Whether high or low, your credit rating will dictate the interest rate on your loan; knowing your budget will help you figure out how much you can afford for monthly payments. If your monthly payments are more than your budget allows, you run the risk of defaulting on your loan and damaging your credit rating.
Figuring out your budget can also help you decide how much you’re able to put forward as a down payment —  a larger down payment often translates to lower rates because you’ll be borrowing less.
Now, let’s get into the differences between bank financing and dealership, or in-house, financing.

METHOD 1: BANK FINANCING

If you have a good credit rating securing a used car loan through a bank or credit union might be the right choice for you. Getting a loan through your current financial institution can be a convenient option since all of your finances are in one spot. If you’re an established customer, your bank might even offer you a discount on interest rates or fees and most banks are open to negotiating the terms of your payment period.
However, because of their stricter rules and regulations, banks will only grant loans to customers with favourable credit — even for pre-owned vehicles. So, if you have a low credit rating you might not get approved. 
Some banks are wary of granting loans for used cars because they depreciate in value quickly. It’s a good idea to ask about the financing options for the specific make and model of the car you’re interested in.
It can also take longer to get approved through the bank, so you might be stuck waiting several business days to find out if your loan application has been accepted.

METHOD 2: IN-HOUSE (DEALER) FINANCING

The second option is to get financing directly from the dealership you’re buying a car from. The main advantages of in-house financing are speed and flexibility. 
Because the application and approval process is a lot quicker, many dealerships are able to offer same-day financing. That means you can take a test drive in the morning and drive your new (or new-to-you) car off the lot by the afternoon. This way you won’t have to worry about someone else snatching up the used car you fell in love with while you’re waiting for financing to come through. 
Dealerships offer significantly more flexibility for borrowers with less-than-stellar or non-existent credit (as is the case with students or new Canadians). If you have poor credit or have gone through a bankruptcy, shopping for a vehicle can be frustrating and disappointing. In-house financing can help get you into the car you want, even if you’ve been previously turned down for a loan through your bank. 
At Birchwood Credit Solutions, we look beyond our customers’ credit rating. Once you apply for financing, our team will review your whole financial situation and work with you to pick an appropriate budget and payment options. We can even offer you help and advice on how to repair your credit rating.
Learn more about Birchwood Credit Solutions’ Bad Credit Car Loans and quick, hassle-free application process. You can also contact us to talk directly to a car financing expert.

When is the best time to buy a car?

Getting a good deal on a new or used car can depend on the time of year you buy it. Make sure you keep an eye on the calendar so you can take advantage of seasonal factors affecting the car trade and take advantage of the best month to buy a car. So if you are looking for the best time of year to buy a car, here are some dates to bear in mind.

Best time to buy a new car

Choosing the best time of the year to buy a car could potentially save you thousands of pounds.

Here’s what to bear in mind:

  • Convertibles are more desirable in the summer, so there might be bargains to be had in the winter.
  • At the end of each quarter – particularly the end of June and December – dealers might be keen to hit their quarterly sales targets and more likely to offer you a good deal.
  • Demand for four-wheel-drive vehicles usually peaks during autumn and winter because of poorer weather, so you might get a bigger discount in the summer.
  • In February and August many dealers offer some real bargains, while sales are slow as buyers wait for the new number plates coming in March and September. But If you take advantage of this lull, your ‘old’ number plates will make your car seem older than it really is, so it will depreciate faster.
  • Find out when new models or ‘face-lifted’ existing models are due out, then buy the previous version during its last few weeks in the showroom. Dealers will be want to shift this stock and be more likely to offer you a good deal. But remember an older model will depreciate faster than the new arrivals, even though it’s roughly the same age.
  • Showrooms are quieter on weekdays so drop in on a Friday – when the dealer will also be keen to meet their weekly target. This gives you an advantage when bargaining with the salesperson.
  • Wait a few months after launch before buying a new model – by then there will be less showroom buzz about it so the dealer might well offer you a better deal.

Best time to buy a used car

Seasonal trends in sales of new cars have a knock-on effect on the cost of used cars.

Time your purchase right and you could get a real bargain:

  • Avoid buying used convertibles in the spring or summer – wait until winter, when demand is much lower.
  • March and September are the peak months for sales of new cars, often through part-exchange deals. So dealers will have lots of used cars to sell, which puts you in a strong position when negotiating.
  • Dealers are also often keen to clear out used cars in July and early August in readiness for new models and the registration plate change on 1 September.
  • December and January are quiet months for the used car trade. Cars aren’t on people’s minds around Christmas and the New Year so dealers and private sellers are keen to make a deal.
  • Buy four-wheel-drive vehicles in the summer – demand peaks in the late autumn and winter because of the poorer weather.

3 Ways Dealers Help You Find the Perfect Used Car

Despite popular beliefs, seeking the assistance of a dealer while searching through the multitude of available used cars is a smart move which any budget-conscious buyer should consider when in the market for a ride of any shape, size or brand. There are many ways in which using our dealership for assistance throughout the shopping process makes the whole experience simpler and much less stressful, but the top three include:

We Offer a Larger Selection

Whereas you may have to drive hours to view a single car when shopping among private sellers, our large selection of vehicles gives the ability to view many new cars at once, increasing your chances of finding the perfect used car quickly. This saves you time, money, and plenty of energy with which to enjoy your newly-purchased ride after the decision has been made.

We Offer Financing Options

In most cases, even used cars have financing options available for buyers of all backgrounds. This means that you won’t be restricted to one or two cars on the lot that fit within your immediate budget. Together, you and our expert staff members can work out a payment plan for practically any of our used vehicles, expanding your opportunities and helping to ensure you find the right car for your needs.

We Offer Quality

Aside from offering an excellent quantity of vehicles, we always ensure that our used cars present quality under the hood as well. Before selling cars to customers, we inspect the vehicle and make repairs as necessary to ensure you’re getting what you pay for: a reliable ride that’ll get you from one place to another without a hassle. When you find the right car, you’ll never have to worry about it being a lemon.

These are just some of the ways in which we can help you find your perfect used car and get you on the road again in no time. Check with us to learn more about your options.

Key Steps to Take When Purchasing a Used Car to Make Sure You Are Comfortable

If you are on the hunt for quality used cars in your area, there are some key steps to take to be sure the entire process goes well. We recommend taking these steps to ensure you get exactly what you want and spend the amount you want to in the end. The most important thing is guaranteeing the vehicle you buy is top quality. We want to make sure that happens for you, so here are the steps to remember in the process.

Consider All of the Details When It Comes to Finances

Our concern is not how much you spend, but that you spend a comfortable amount and receive the quality you deserve. This is why we recommend you figuring out your detailed budget beforehand. Calculate in everything, including the total payment of the car and any insurance that you need. Also, be sure to not make a car payment that is over 20 percent of your take-home income. This way, you will find yourself in a safe and secure ride and not in a financial hole.

Have an Inspection Done on the Car on Your Own

While all of our vehicles are thoroughly inspected and are in top condition for you before you even check them out, we recommend you taking it for an inspection on your own with someone you have history with and trust. Our goal is for you to feel like you can one hundred percent trust our vehicles and us. This is why you should take it to a mechanic you know and confirm the positive inspection results we will give you.

We are set on offering you used cars that are of the best quality around. All of our cars have been tested, driven, checked, inspected and have come out with clean results. We want you to be happy with your buy, so we recommend you take the steps above until you feel confident with the car you are considering.

Avoid These Mistakes When Buying Used Cars

Whether buying new or used cars, this should be a happy time for you. However, sometimes people don’t approach the car buying process the way they should and end up making some mistakes. Here are some mistakes that we have seen people make that we want you to avoid on your quest for the perfect vehicle for you.

Not Buying from A Reputable Dealer

Car dealerships and salespeople often get a bad rap. However, you will find that most just want what’s best for you. Try to find a dealer that has a good reputation in the local area. Look online to check out their reviews and what other customers are saying about them.

Skimping on The Test Drive

When you take a car out for a test drive, make the most of it. Drive a route that looks like the route you will usually take every day during your average commute. Drive on the freeway and down a city street to see how it handles at slower or faster speeds. Then consider taking it to a mechanic you trust so they can identify any potential issues that could come up in the future.

Not Knowing the Value of Their Car

If you are planning to trade in a vehicle or sell your vehicle prior to purchasing a new one, make sure you know what your car is valued at. There are many tools online to help you determine your car’s value. Remember that when you go to sell or trade in your car, you are unlikely to get full market value for your car. However, be flexible and negotiable and you should have a great experience.

Buying used cars is a fun process and you should be able to enjoy it. With some of these steps in mind, you’ll be well on your way to a new car purchase that you will love for years to come.