When you decide to go to a car dealership in Toronto, it’s important to know approximately how much you should be paying for a car loan. In 2019, there are a number of factors to pay attention to. No one’s going to pay the exact same amount for a car loan because of the various factors.
First, you need to look at the average car price. Whether you buy a coupe, a sedan, an SUV, or some other vehicle, this will determine how much the vehicle is that you will be getting a loan on. Overall, car prices are up 1% over 2018.
Second, you need to look at your credit score. Buying a car will involve a credit based loan. If you have good credit, you will get a good interest rate. However, if you have bad credit, you may end up having to settle for a higher interest rate. This can cause you to pay more for your car loan, especially if you have longer than desirable car loan terms. Many dealerships would rather offer you longer loan terms than to lower the cost of the car, ultimately providing you with a lower payment.
Third, you have to look at the car loan terms that are being offered to you. Most lenders will offer between 48 and 60 months. This means that the total cost of the vehicle is being spread out over these many months. Obviously, longer loan terms will provide you with more affordable monthly payments. However, you will be paying the interest rate for longer, which can end up being quite expensive by the time your vehicle is fully paid for.
How much you should be paying is a completely individual decision. Applying for a car loan prior to going to the dealership will allow you to know what kind of monthly payment you’re able to afford. From there, you can establish how much money you can spend on a vehicle and what terms work best for you.
Particularly if you want to stay within 48 to 60-month loan terms, you may have to be willing to pay a bit more on interest. Otherwise, you can lower the cost of the car by choosing a different model or one with a lower trim level.
Recently, it was estimated that the average car payment is over $500 a month. However, if that’s not what you have within your budget, there are plenty of options for you to consider. Now that you know what goes into the terms, you can make adjustments in one or more areas.
Dealerships will also ask you what you can put down in cash towards the vehicle. This is to reduce the total amount that will be financed. If you have the cash, it may be advantageous to put $1,000 or more down so that you can reduce the total cost of the loan and keep your monthly payment lower.
In the end, know what you can afford. This will make it easier to avoid overspending on your car loan.