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Financing options for used cars: what you need to know

If you’re in the market to purchase a used vehicle, you’re probably wondering what you need to know about your financing options. 

There are two primary financing options available to buyers, each that can benefit you depending on your financial situation and preferences. Let’s explore these options and the advantages and disadvantages, so you know what to expect before you apply for used-vehicle financing and so you can make your purchase.

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Getting Finance Through a Dealership

Many buyers get their used vehicles financed through a dealership. The main reason for this is the convenience factor. It’s like a one-stop shop where you can walk into a used car dealership in Calgary, choose your used vehicle, get the financing approved, and drive away on the same day. But there’s more involved in the process -- let’s take a closer look.

Pro: Bonuses and Discounts

A dealership is likely to provide you with great specials on their used vehicles and throw in a few bonuses during the financial negotiations. A pre-owned car dealership in Calgary may extend warranties or offer you other upgrades.

Pro: Getting Approval with Bad Credit

A dealership will be more likely to give you financial assistance even though you may have bad credit. A used vehicle financial advisor in Calgary will take the time to assess your situation and assist you wherever possible.

Con: Higher Interest Rates

Interest rates at dealerships can be steep, especially if you have bad credit. It would be best to consider this critical factor so you don’t end up paying more than you initially anticipated.

Obtaining Finance Through a Bank

The most significant advantage of getting finance through a bank is that your chances of success are greater if you have a good and long-standing relationship with your bank. Let’s take a closer look at some of the other pros and cons of going to a bank for your financing.

Pro: Competitive Interest Rates

Banks often have much-more competitive interest rates than dealerships, meaning you will be paying back less over time. 

Pro: Accommodating Payment Terms

Banks offer flexible payment terms and calculate your affordability accordingly. You can negotiate with the bank to extend or shorten your payment terms based on your lifestyle and financial means.

Con: Strict Approval Requirements

Banks have strict lending rules, and financing approval may be more challenging than it is at a dealership. Plus, a bank typically won’t approve your application if you have a bad credit history.

Con: Prolonged Underwriting Process

Banks tend to take several business days to complete the underwriting process, which means you won’t get the financing approved immediately. That’s why it’s best to get pre-approval before you start looking for a used vehicle.

Final Thoughts

The most popular means to obtain finance to purchase a used vehicle are through a dealership or through a bank. It’s best to consider your current financial situation, lifestyle, and personal preferences before deciding which one to use. Both options offer advantages and disadvantages that will determine your final decision.