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Auto loans 101

So you’re in the market for a new vehicle. Maybe the car you bought when you were sixteen is on its last legs, or the kids are all grown up and no longer need rides to soccer practice in the family mini-van. You could also be looking for a new company truck. Whatever the reason may be, you’ve got to get several things right: choosing the right vehicle, getting a good price, and funding the purchase in the most affordable way.

For many people, that’s through auto financing – like a loan. And if you’re going to borrow from a bank or credit union for your purchase, the choices you make on your auto loan are really important. Here are a few things to consider when shopping around for a new vehicle, and why an auto loan could be a great alternative to paying with cash.

What’s an auto loan?

An auto loan helps you buy a vehicle that costs more money than you may want to part with all at once.Unless you have a substantial amount in savings (or are sitting on a small fortune from your great aunt), you’ll probably borrow and pay off your vehicle with flat monthly payments.

Why is auto financing a better alternative to cash?

You’ll have more money in your savings. By taking out a car loan, you’re keeping the purchase price of the vehicle in your savings account. Some people may choose to pay off their car in full with cash, which might give you a little extra breathing room when it comes to your monthly budget. But it’s important to make sure that paying cash won’t clean out your savings (and leave you in a tricky situation) should an emergency arise. Emergency funds are part of any good financial plan, after all. It also frees up capital for other investments and expenditures, like your RRSP or mutual funds.

You can breathe easier. When you get approved for your loan, you can focus more on finding the vehicle that’s right for you, and less about the logistics of funding your purchase. The dealer will work with the lender to complete the funding. You’re not a banker, and you don’t need to be.

Also, by having a pre-approved loan before you walk into a dealership, you have the confidence of knowing you’re fully qualified to purchase a car, and won’t have to rely on the dealer to make that decision.

You can get personal. If you’re looking at a car from a private seller online, our auto loans can work for personal sales as well (head’s up – this is unique to Coast Capital). That way, you can get the car of your dreams… without worrying about trying to come up with the cash.


Things to keep in mind when taking out an auto loan.

  • Determine what you can afford. While you may really want the newest Lamborghini model, be realistic with your budget and stay within your means. The good news? Your loan can be used on both new and used vehicles.
  • Check your credit score. If you’re not sure what your score is, you can request to have it sent to you for free. The higher your credit score, the better your loan rate will probably be.
  • Shop around for the best car deal. Whether it’s from the dealership or a private sale, use your sleuthing skills to compare car prices before settling.
  • Keep in mind the ‘extras’. That includes taxes on your new ride, plus interest and insurance. The little things can add up, so be sure to budget for them when applying for your auto loan.

Ready, set, loan!

Whether you’re buying your first car off a friend or leasing a van for your small business from a dealership, our team will help figure out the loan or lease that’s right for your unique situation. Already have a vehicle but paying too much interest? Refinancing can lower your payments on existing auto loans and leases, freeing up a bit of dough each month. We can help with that, too.

That means the only thing you need to worry about is whether you want a sunroof or not.


The stuff we need to say.

Coast Capital Savings Federal Credit Union provides advice and service related to deposit, loan and mortgage products. Coast Capital Wealth Management Ltd provides investment and financial planning services. Coast Capital Financial Management Ltd. provides advice and service related to segregated funds, annuities and life insurance products. Worldsource Financial Management Inc. provides advice and service relating to mutual funds. Mutual fund values change frequently and past performance may not be repeated. Commissions, trailing commissions, management fees and expenses may all be related with mutual fund investments. Important information about mutual funds is contained in the relevant fund facts and simplified prospectus. Please read the fund facts carefully before investing. Only deposits held in Canadian currency, having a term of five years or less and payable in Canada are eligible to be insured under the Canada Deposit Insurance Corporation Act.

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