You’ve gone to the dealership, test driven the car of your dreams and decided which one to take home. Maybe you’ve chosen a brand new, top-of-the-line sports car. Perhaps you’ve gone with a practical, slightly used sedan. Or maybe you’ve taken the environmental route with a hybrid. Either way, you know what vehicle you want to buy, but before you can enjoy that fantastic new car smell you have to figure out the financing.
Car dealerships offer a variety of options for vehicle financing, but the process can be overwhelming, especially if you’ve just spent your energy choosing the perfect car. When deciding on vehicle financing, here are three things you should know:
1. Fixed versus variable interest rates
Fixed interest rates do exactly what they say—they set one interest rate for the term of the loan. Variable interest rates fluctuate based on a prime rate. With variable interest, your monthly payment could change depending on the up or downward movement in the prime rate over time.
2. Choosing your repayment period
Setting the repayment period is also an important consideration. A longer payment period means the monthly payment is decreased, but it also means you’re paying more in interest in the long run. A shorter payment period means your monthly payments are larger, but overall you’ll pay less in interest.
3. How much deposit to put down
The size of your deposit also affects how much your monthly payments are, your ability to finance a car, and the amount of interest you pay. The higher the deposit, the more favourable those other factors will be. But not everyone has a lot of money to use upfront as a deposit, which is where a personal loan could come in as a viable option.
Alternatives to dealership financing
Prospera Credit Union offers 10-year vehicle loans to help reduce the stress of buying a car. Their loans are available on new and used vehicles and borrowers can get up to 100% financing on their vehicle purchase, including the warranty and taxes. New vehicle loans can amortize for up to 10 years, while used vehicle loans can amortize for up to 10 years minus the vehicle’s age.
For those who want it, life and disability insurance are also available. Prospera even has a loan calculator to help you figure out how different loan terms affect your monthly payments. You can be pre-approved for the loan so you can go vehicle shopping with your financing already in place—a great way to reduce the hassle of buying a car. Moreover, Prospera takes care of all the financing so all you have to do is relax and enjoy your new—or new-to-you—car.