A simple guide to understanding car financingBy Kijiji Autos
If it's your first time making a big purchase, you may need a quick run-through of how financing works. Your car dealer will be happy to make the complicated aspects of your loan agreement more understandable, but if you want to be prepared beforehand, we've got you covered.
What does financing mean?
Financing refers to when you buy a car using credit. Unlike leasing, this means you actually own the vehicle from the start. Typically, you borrow the money from a bank, credit union or from the dealership itself.
When you finance a vehicle, you receive the loan in one lump sum, which you pay back over time plus interest. The interest rate will depend on a few factors, including your credit score.
Length of term
This refers to the length of time for which the loan lasts. Usually lasting somewhere between 36 to 72 months, your payments will be lower if you choose a longer option and the opposite if you have a shorter time frame—these are your repayment terms.
Much like when using a credit card, when you finance a car, a credit agreement is struck between the buyer and the lender. This determines the interest rate and payback period and must be signed by you to receive your car loan.
Credit (or loan) amount
This refers to the total credit amount on a loan for a car; it’s the amount you will receive for the loan once the arrangement fees have been paid.
The credit cost is an expression of the total price you will pay to borrow money for financing a car. This includes the sum of interest, fees, etc., to give a complete cost of the loan as a cash amount.
The monthly payment is the full amount you pay to the loan provider each month that is agreed upon. Not only does this include the installments of the borrowed amount but also the arrangement fee and interest.
This refers to a one-time amount that you pay to set up the car financing. Typically, this fee is added to the monthly payments and represents a number of costs incurred by the loan provider.
Credit reference agency
A credit reference agency is a company that collects information about individuals and their credit histories. This information is then used in the agency’s credit assessment of a person, which will determine the amount of money that banks and other financial institutions will be willing to lend them.
Annual percentage rate
The annual percentage rate (or APR) is the interest rate on a loan for a whole year. APR is commonly used to compare the costs of different loans over a period of time.
For more information, visit Kijiji Autos to browse a wide selection of vehicles and learn more.
Easily find your next ride on Kijiji AutosSearch now
Everything you need to know about financing and leasing your next car
Shopping for your next car online is fun. Figuring out how to pay for your next car is not. When buying a vehicle, you have a few payment options for what is likely the second most expensive purchase you'll ever make: financing or leasing (or paying cold, hard cash if you have it). Not sure which...
Everything you Need to Know About the Toyota RAV4
If you are looking at buying a family vehicle, there are certain things you should consider. Like how much room will you need for the size of your family, and if this will change in the future. Fuel efficiency is essential for budget considerations, and with children, you want to feel confident...
Everything you Need to Know about the Honda Civic
Buying your first car or a new vehicle for your family is exciting. There are so many things to think about – affordability and economy, reliability and safety, and of course, style. Set a realistic budget based on the down payment and any monthly installments on any loan you may have, and...
Everything you Need to Know About the Ford F-150
The Ford F-150 is one of the most popular pickup trucks in Canada. With optional two- or four-door cabs, the F150 is just as suitable as a family car as it is a <a href="https://www.kijijiautos.ca/cars/trucks-cargo-work/" title>work vehicle</a>. Versatile, durable and well-equipped with Ford's...
10 popular SUVs and crossovers in Canada
There's no doubt that Canadians navigate a wide variety of weather and lifestyle conditions every day. This makes a fun, practical and comfortable SUV or crossover a solid vehicle choice, from coast to coast. Listed in no particular order, check out these 10 popular SUV and crossover models to...
The best features of 10 popular hatchbacks
If you are in the market for a hatchback, you'll want to check out this overview of these 10 models and the features that make them so popular. Kijiji Autos will help you confidently choose between the best hatchbacks, including used, sporty and hybrid models – whatever is a priority for you.
What you should know about these 10 popular wagons
If you are looking to buy a wagon, explore Kijiji Autos list of these popular models, and the features that make them a great choice for your next car. This list is in no particular order and will help you easily choose between great wagons, whether you’re looking for luxury, affordable, small...
7 popular convertible cars in Canada
Convertibles are fun and adventurous cars that are perfect for cruising around when the weather is great. Are you looking to buy a convertible? From roadsters to off-roaders, convertibles (or cabriolets) are a great choice for those who love driving for its own sake. Can't decide which...
You won't want to miss out on these innovative 2021 car features
Whether they're designed to improve our overall comfort or enhance the driving experience, even the most affordable of new vehicles now come absolutely jam-packed with innovative features. Carmakers include amenities like Bluetooth connectivity, power windows and heated seats with more advanced...
Everything you need to know about trading in your car
If you think it's time to upgrade your everyday vehicle, but you don't want to bother with selling it privately, then trading your car in is likely the option for you. Trading in refers to the process of applying the value of your current car towards a new or gently used option at a dealership.