The majority of cars and trucks are financed in Canada and even used cars are often financed. To get the best rates on your auto loan you must be prepared before you want to buy your car. Most of the best auto loans are available from banks, credit unions, or other private sources. And, getting pre-approved for a loan is a good way to help ensure you get a good price on your car when you get to the dealership.
Specialized auto loan companies will typically offer the best rates. The dealership's car loans will most often be the worst rates. It is hard to tell for sure unless you do your homework. Compare rates with many places, listen to the dealership's offer, and then decide. Do not be pressured.
You could also get a home equity loan to buy your new or used automobile. Rates are very low and the interest is often tax deductible. The downside is that these types of loans are usually expensive to set up. If you already have a home equity line of credit then you have already paid the expense of applying for this type of loan. It will probably be your best bet.
New cars are typically easier to finance than used cars. While you can still get automobile loans for used cars and trucks, the interest rates are typically higher. If the bank has to repossess the vehicle because you do not pay the loan back, they know that it will likely be worth less money. The lender will not be able to recoup their losses. So, if you must finance your vehicle, run the numbers and see if a new vehicle might not end up being cheaper than a used one.
Interest rates on your new auto loan may vary depending on the down-payment you are willing to put down. The larger the down-payment, the lower the interest rate that can be expected. Again, run the numbers. If there is a huge difference in interest rates, it may pay to scrounge together a larger down payment. If not, then there is no reason to put down much money.
Since auto dealers are providing financing themselves these days, they often will sell cars at lower prices but get you on the financing. In fact, dealerships do not like cash deals. They would rather you take out a loan from them or their affiliated companies because they will make even more money on each sale. So, again, be prepared with your own financing. Get the lowest price on the car you can find, and only then talk about financing.
Make sure you read through the terms of your auto loan very carefully. If the term of the loan is very long, the monthly payments might be small, but the total interest you pay will be quite high. Or, there may be silly provisions in the loans that make it very difficult to refinance with another company, pay your loan off early, or even trade in your car for another.