Speak with a Loans Canada representative today and learn how you can refinance your car loan and save. Call us today at:
1-877-995-6269
Buying a car can be complicated and disappointing, especially from a dealership. When there’s tons of auto terminology to learn and remember, it’s easy for a sketchy salesperson to dupe you into financing a vehicle that’s not worth the money.
Whether it’s high rates, dealer add-ons, or long loan terms, dealerships take advantage of Canadians in many ways.
Read this so you won’t get caught off guard next time you’re in the market for a new car.
Newer vehicles are expensive, which is why some dealerships offer loans so customers can finance cars over time Unfortunately, this is one way dealerships will try to take advantage of you. Here’s what can happen:
Longer loan terms result in lower rates but more interest. Here’s an example of how dealerships manipulate the length of your term and the cost of your financing plan:
| Term Length | 36 Months | 84 Months |
| Loan Amount | $25,000 | $25,000 |
| Interest Rate | 7% | 5% |
| Monthly Payment | $743.06 | $353.35 |
| Total Interest | $1,750 | $4,653.48 |
| Total Paid | $26,750 | $29,653.48 |
While your payments would be smaller, a longer-term can mean you’ll pay hundreds, even thousands more for a car than you would with a shorter-term and higher rate.
If you’re not sure whether you can afford your car loan, use the “20/4/10 rule”. According to experts, the best way to avoid paying more than your car’s value is to make a 20% down payment, choose a term of 4 years or less and don’t spend more than 10% of your income on related expenses.
Another way dealerships screw you is by adding services to the car’s final cost, such as:
These services are optional, but many dealers will try to convince you that these are necessary add ons to protect your car. However, the reality is most aren’t even necessary. For instance, paint protector is a chemical that is applied to your car as a layer of protection from dirt, debris, bird dropping, UV rays and other things that can cause superficial damage. Typically, these superficial damages aren’t a concern for most consumers and are not worth the added cost.
Learn how to save money on your car insurance.
Ever heard the expression, “the deal is only good for today”? You might have because it’s a common way for dealerships to get your attention. Here’s how to avoid such traps:
You’re not obligated to buy a car until you’ve signed a contract. There are plenty of affordable vehicles out there, so do your research before agreeing to anything.
Going to a dealership without doing your due diligence makes you an easy target for manipulation. Not to mention, it’s difficult to navigate your way around a deal when you don’t know what’s fair. Before you buy a dealership car, be sure to:
Some dealerships charge for processing paperwork, others tack on a “green tire levy” for having to recycle tires. These fees can be unreasonably high (around $400 – $1,200) and many provinces are now banning them following customer complaints.
Additionally, dealerships aren’t required to inform you about the cheapest loans that you’re actually eligible for. Legally, they can even increase your interest rate, making their loans pricier than any bank or credit union’s, which is why you should always get a second quote from your financial institution before negotiating with a dealer.
While buying a vehicle is almost always a hassle, there are ways to get it done without being ripped off. All you have to do is research different vehicles and sellers in your area, manage your budget properly and watch out for the dealership tricks above.
Rating of 4/5 based on 8 votes.
Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.
Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.
Loans Canada is pleased to announce it placed No. 131 on the 2022 Report on Business ranking of Canada’s Top Growing Companies.
Earn an average 5%¹ cash back at thousands of partners and at least 0.5%² cashback guaranteed.
Build credit while spending money with the Refresh Financial VISA card.
With KOHO’s prepaid card you can build a better credit score for just $10/month.
All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.
When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.
Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.
