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Find the Right Financing for Your Car

 

How Should You Pay for Your Vehicle?

You could potentially pay cash for a car, especially a used one, but it’s not often recommended. If you have the money and available financing is cost prohibitive, you could consider it, but dipping into savings to pay for something that depreciates as quickly as a vehicle often doesn’t make sound economic sense. Taking out a loan to buy a car has its benefits, but so does leasing. The right option for you depends on your personal preferences and finances. Don’t base your decision solely on a dealer’s advertised financing rates or super-low cost leases. Those offers get customers through the door, but they are usually only reserved for the most qualified buyers, and they may not be your best financing option.

Find out which option is best for you.

Use the "Should I finance or pay cash for a vehicle?" Calculator

Why You Should Lease

Leasing may cost a little more in the long run, but for the short term, you can get monthly payments that are 30-60 percent lower than loan payments. Or, maybe the long-term expense is worthwhile so that you can get a new model every couple of years.

Here are some common reasons why you might decide to lease instead of buy:

  • You need a lower monthly payment.
  • You don’t have a down payment.
  • You like driving new car models with the latest safety features.
  • You feel safer knowing your car has warranty protection.
  • You want to avoid the hassle of trading or selling to get your next new car.
  • You have consistent driving habits and can predict your mileage each year.
  • You can save for possible lease-end charges.

The recession has resulted in fewer dealers offering leases, and when they are offered, they usually carry additional restrictions and qualification parameters.

Leasing can also turn into an expensive, vicious cycle. If you drive more than the allotted miles for your lease, you may owe the dealer a sizable sum. A dealer may offer to waive the payment in exchange for your agreement to take on a new lease. If experience has taught you that leasing may not be the right option for your lifestyle, then agreeing to a new lease may land you in the exact same spot in another two or three years. However long you continue the cycle of leasing, in the end you will own nothing, and you could owe a lot.

Need help making your decision?

Use the "Lease or Purchase Calculator".

Why You Should Buy

Some people prefer the pride that comes with owning a car. It will cost you more up front, and it’s true that a car is worth less the minute you drive it off the lot. But, buying a car is not an investment, it’s an expense. By committing to higher monthly payments now, you’ll own the car outright when the loan is paid off. Then you can keep driving it payment-free or sell it to help finance your next vehicle.

You may be better off buying a car if:

  • You like the idea of having ownership.
  • You would like to be payment-free at the end of the loan term.
  • You can save for unexpected repair costs.
  • You drive a lot of miles, on average.
  • You like to drive the same car for three years or more.
  • You want to customize your car.
  • You want the option to sell the car anytime you want.

But, what about 0% financing offers? They are great deals when you can get them. But, be sure to read the fine print. Sometimes 0% is only available on shorter loan terms of two or three years. You won’t pay interest, but the higher-than-average monthly payment may sting your budget. Like great lease deals, discounted financing offers are only made available to the most qualified customers with excellent credit ratings. Use the Vehicle Payment Calculator to find out what your monthly payments would be if you decide to buy.

Need more help making your decision?

Use the "Lease or Purchase Calculator".

Understand Dealership Financing

If you decide to buy, dealerships have streamlined the process from start to finish. But, dealerships aren’t banks. They do not finance car leases and loans or approve customers for leases or loans. Dealers simply act as screeners then pass your information along to their preferred financing company or the manufacturer’s own service (GMAC, Ford Motor Credit, American Honda Finance, etc).

In many cases, you’ll pay for a dealership’s financing services—whether you know it or not. Some dealerships mark up financing rates by 2.0% or more.

Want to know which deal is better?

Compare financing offers and rebates with the "Special Dealer Financing Calculator".

Leverage Your Banking Relationship

You don’t have to accept dealership financing. If you have a banking relationship, your bank may be more likely to approve your loan request and offer you a better interest rate. RBC Bank offers competitive interest rates and flexible payment options for both new or used cars.

An RBC Bank Car Loan gives you a competitive interest rate and flexible payment options for new or used cars1. Have your car payments automatically deducted from an RBC Bank checking account to get the lowest possible interest rate and ensure on-time payments.

For homeowners that have built up equity in their home and are willing to leverage their house, an RBC Bank Home Equity Loan or Line of Credit is another affordable way to finance your car purchase.1 A home equity loan is a smart borrowing option that may offer a lower interest rate than other types of loans. The interest you pay may even be deductible at tax time.2 With a Home equity line of credit  you'll have the flexibility of a line of credit so you can pay down the principal as you want each month with the added flexibility of having those funds available to draw on at a future date.

If you’re ready to buy a car, RBC Bank can help.

Visit your RBC Bank banking center today or call 1-877-RBC BANK (877-722-2265) to learn more about financing your next car purchase.

1Subject to credit approval.
2Consult your tax advisor regarding deductibility of interest.

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Related Topic: What Car can You Afford?