As we regularly do at LeaseCosts™ Canada Inc., today I want to share with you some insights. These will certainly help you prepare for your next vehicle purchase/lease: break down your alternatives to pay the less interest possible on a loan.
Car Loan Interest Rates Historically
Back in the 1980s, when the Bank of Canada interest rates were above 20%, it was a pretty big deal to get a car loan. A brand new 1980 BMW M3 used to cost about $7,000, and you could end up paying up to $2,800 more for 3 years, which would be almost $9,000 today, adjusted for inflation. But since, rates have been going down to the point that the average new car loan in 2020 was 4.38%, with some 84-month finance offers at 0%. (Stats Can).
This is why a car loan is the most popular way of "financing" a vehicle acquisition/lease today. Getting the right loan is crucial for a fair cash flow <-> value relationship in your personal finances, so make sure to know all your available options:
The 3 Main Alternatives
- Credit Score 750+ | Evaluate the manufacturer rates: if you are looking to lease or finance a brand new car, the manufacturer will likely be your first preferable option. Due to their intention to sell vehicles massively, rates show up as a very competitive option.
- Credit Score 680+ | Consider your own bank rates: Your bank can also give you some personalized alternatives. They know your finances, they store your financial assets and will likely be better positioned to get you a good rate.
- All Credit Scores | Evaluate a loan search engine: Multiple services help you find the right loan for your specific needs. Think of it as a "reverse" search: you have your conditions and, instead of looking for a bank to adjust to it, dealerships and banks will do it for you. The most popular out there is Loans Canada, and it takes just a couple of minutes to apply. And it is FREE!
There are Always Options
As I mentioned before, you should always consider the options that will lead you to the most comfortable, affordable and reliable solution. Either if you drop by a dealership or call your bank, there is always the fastest alternative of knowing right now what your best options are.
