The dealership isn’t the only place to get a car loan
Most Canadians plan to get financing for their car purchases from a dealership, and the reasons boil down to convenience, cashback options and low or even zero percent interest rates. But it’s rarely the best way to get a car loan.
Seven out of 10 Canadians apply for financing from the dealership they buy a car from, according to a recent survey by data science firm FICO. Out of the nine countries surveyed, which included Australia, the U.S., Germany, Mexico, Chile, New Zealand, Spain and the U.K., Canada ranked first when it came to consumers who were most likely to get financing directly from their dealer.
Being able to make a car purchase and secure financing for it in a single location is an appealing option for many reasons, according to experts: dealerships offer cashback options for cash sales, access to credit from banks as well as incentives from manufacturers themselves, which include low or no interest loans.
While the benefits of this approach are clear, consumers should be aware of the choices out there, which range from brokers willing to sift through various lenders to find you the best deal to banks which can offer competitive loans.
Banks, for example, will likely have a more comprehensive picture of your financial situation, Brad Robertson, a senior financial planner at CIBC Investor Services, told the CBC. In addition to issuing you a car loan, they might be managing your retirement fund, mortgage, credit cards and lines of credit.
This could be an advantage if you want to better understand how big of a car loan you can afford. Robertson said that banks can help customers decide on whether to go with a fixed or variable rate, depending on their financial situation.
As people continue to favour dealerships, banks may soon try to capture some of their business, suggests Kevin Deveau, vice president of FICO Canada. If banks offered more options for bundling, incentives and convenience, they may be stronger competitors against dealerships in the future.
“You’re in their showroom and they have some pretty attractive offers when it comes down to leasing and rates and monthly payments,” he said.