Dian Cohen
Areader wrote to ask the best way to finance a car purchase.
I am a senior who doesn’t like debt. I need to buy a new car. I have $10,000 to put down on a car, and I would take a bank loan for the balance. The salespeople tell me I don’t need to put down any cash because their loan rates are so low. What’s the best thing for me to do?
The salespeople are correct: keep your money. This year, because of the pandemic, what’s on dealers’ lots is different – inventory is down as much as 50 per cent on some lots. There may not be as many 2021 models coming in and they have fewer 2020 cars. If you’re lucky, they may have some unsold 2019 models. With demand outpacing supply, prices for both new and used cars have skyrocketed.
Dealers may hold the line on price because of the shortage of inventory, but they love it when you finance a car. Their financing costs will be lower than the banks, so your best bet is to get the lowest rate you can find – many dealers are offering 0 per cent financing. You can get pre-qualified before you start visiting dealerships to find out firsthand what rate and deals you’re eligible for. Canada Drives https://www. canadadrives.ca/ can help you figure out what kind of financing you qualify for and can even get you pre-qualified online. With a pre-qualification in your pocket, you’ll know exactly how much you can afford. It also gives you something to compare to the dealership’s offer. Make sure you bring your calculator with you.
Although dealers may hold the line on price, they want your business. That means you can demand some perks: winter tires on their own rims, maybe carpets for the front and the back, maybe some oil changes for free. But to be successful in your negotiations, you need some ammunition before you even go to a dealership.
Do your homework. Educate yourself so you can go into negotiations well-prepared to get the best deal as possible. Edmunds.com, Consumer Reports, and Kelley Blue Book (KBB) are great places to start researching cars in your price range. And think about a zero-emission vehicle. The Government of Canada offers point-of-sale incentives of $2,500 to $5,000 for consumers who buy or lease an electric vehicle (EV). In addition to federal incentives, Quebecers are eligible for rebates of up to $8,000 on EVS under $60,000.
Always negotiate based on the purchase price of the car, and not the monthly payment. Also make sure you know the “full” purchase price of any car you buy, including taxes, car preparation, delivery fees and other hidden costs you won’t know about unless you ask.
As an older buyer you might want to think about how your lifestyle and health might affect the kind of vehicle you need. Are you going into retirement? Can you bend and lift as easily as you used to? Will you need cargo space for a walker? Are you a grandparent who plans to install a child’s car seat? Do you need a car with a door that opens wide, making it easier to get into the vehicle? Does an SUV make more sense than a sedan?
Pay attention to the interior control panels and labels. The larger, clearer and more legible they are, the better. As you age, your range of motion can become more limited. Some vehicle features, like a backup camera or blind spot detection, can compensate so that you don’t need to turn your upper body to look for obstacles.
Don’t mention your trade-in until the end of the buying process. That way, it won’t blur the dealer’s rock bottom price.
Buying a new car is a major purchase. If your best interest rate is more than 0 per cent, it’s still a good deal. Be sure you know how much more you’re paying for a 72 or 84 month contract. Shorter than that is usually better. Keep add-ons for accessories to a minimum. Rust-proofing, for example, is not necessary despite what the salesperson might tell you. A dealership maintenance plan and extended car warranties are expensive. Even worse, the coverage is often very limited.
Always test drive the car to ensure that it’s comfortable for you.