The Secret to Making a Wise Automobile Investment

Have you ever heard the phrase, "It's not how much money you earn; it's how much you spend?" Following the Depression, individuals were more attuned to where their money went, counting pennies after every purchase. While some people still budget like this, many of us are oblivious to what we spend or have only a general idea of our debt-to-income ratio. What does this have to do with your search for "auto loans near me?" Everything.

IDrive Canada is one of the leading resources in the automotive industry when it comes to financing. We're here to share our expertise and show you why your next automotive purchase deserves thoughtful consideration. Join us as we dive into a few essential facts to consider when buying a car and how an automotive loan can help you rebuild your credit and put you on the path to greater financial stability.

It's Time to Buy a Vehicle: Where Do You Start?

What's the biggest purchase you'll make in your lifetime? Buying a home often gets touted as the most significant financial investment you'll make, but think about the frequency of home-buying compared to how often you'll buy a vehicle. Purchasing a car, truck, or SUV is a significant investment that you'll make every few years throughout your lifetime. So, wouldn't you think that investment deserves careful consideration?

Amazingly, roughly half of Canadians spend less than an hour researching their finance options before buying a vehicle. Instead of shopping around for ways to save money, most shoppers take whatever they can get and mistake longer, seven-year loans and lower monthly payments for a great deal and a sound financial investment. Unfortunately, this belief is far from the truth. Why?

A new vehicle starts losing its value the moment it leaves the lot. Financial experts report that some new vehicles lose up to 11% of their value within minutes, which is akin to lighting a dumpster fire on your hard-earned money. By the vehicle's fifth year on the road, it's usually only worth around 40% of what you paid. So, let's say that you bought an SUV for $40,000, which means you lost around $4,000 before parking it in your garage. In five years, it's only worth $16,000 or even less depending on market trends, mileage, and condition.

Instead of shopping around for a loan, too many drivers happily accept a seven-year loan with the dealership to get seemingly low monthly payments. However, the reality is that they're paying far more for the vehicle when you consider the interest on the loan and the vehicle's rapid loss in value. This is why so many Canadian drivers find themselves in negative equity situations, an instance where they owe more on their car, truck, or SUV than what it is actually worth. Suddenly, that great deal is costing you more, leaving a gaping hole in your wallet.

Shopping Smart: Building for Your Financial Future

What's the first place you turn to when you need a loan? For Edmonton drivers, their bank or credit union is their first and only stop when it's time to secure an auto loan. Your established relationship with the bank makes it more convenient, less overwhelming, and efficient. However, there are a few downsides to relying solely on your bank to secure a car loan.

Most banks require stellar credit scores and strong credit histories before they'll approve an automotive loan. For drivers working to rebuild their credit or establish a credit history, this can make securing a loan impossible. Banks are also less apt to negotiate on the amount of the loan, payment terms, and interest rates, which means the terms may not fit into your budget. In addition, you'll find the overall cost of the loan can be higher due to administration fees and other bank-related charges. These fees, along with depreciation and a long term, don't set you up for success.

So, if your bank won't finance your purchase, who will? You have two other options––dealerships and automotive lenders like IDrive Canada. Many dealerships have in-house finance departments that give customers more opportunities to secure a loan. As a result, dealerships can offer finance specials like 0% interest rates to entice customers to buy. However, the fine print can limit these perks to new models and set restrictions on the loan terms. Additionally, these purportedly great deals are overshadowed by high-pressure sales tactics and lofty down payments that are far from affordable.

While the bank focuses on how much money you want to borrow and how to minimize their risk and liability, the dealership focuses on making the sale and earning a commission. Automotive lenders like IDrive Canada take a different approach by focusing on you and your automotive needs. Our goal isn't to make money off the loan but to see you in the vehicle you want and set you up for financial success. To do that starts by helping you set realistic financial goals and get pre-approved for an auto loan that you can afford and that won't hurriedly put you in a negative equity situation.

Rebuilding Your Credit With an Auto Loan

We'd be remiss if we didn't address the elephant in the room––your credit score. This three-digit number will follow you around your entire adult life and is often the cause of stress and overwhelm for customers trying to secure an automotive loan. Unfortunately, there's no widespread standard of what score qualifies as "good" and will guarantee loan approval, leaving each lender to set its standards and creating more confusion among buyers.

Even more stressful is that a low credit score or a limited credit history puts you in a never-ending cycle. Financial experts recommend rebuilding your credit by securing a loan or taking out a credit card, but how can you do this if you can't get approved? This puts automotive buyers in a precarious situation since they rely on their vehicles to get to work and earn the very paycheck they need to pay their bills. So what's a buyer to do?

While banks and dealerships shy away from working with individuals with low credit scores, automotive lenders like IDrive Canada are in a unique position. By recognizing how much an automotive loan can impact your credit score and help rebuild your credit, we're able to break the cycle by reporting your payments to the credit bureaus. All you have to do is make your payments on time and in full to see the impact.

Why Time Is on Your Side

There's a misconception among consumers that lower monthly payments and longer automotive loans equal a better deal and the opportunity to splurge on a higher-end car, truck, or SUV. The truth is that these long-term loans are costing you more. For example, a $25,000 car with a 36-month loan at a 5% interest rate will cost you $26,974. In contrast, the same car and interest rate with an 84-month loan will cost you an additional $2,707 in interest, which means you're paying $29,681 for the same vehicle.

The best investment you can make is to give yourself time to research your options and consider working with a premier automotive lender. While the majority of Canadians spend less than an hour researching the most affordable way to purchase a vehicle, we challenge you to be different. At IDrive Canada, we encourage all Edmonton drivers to join the minority and set yourself up for a promising future that gets you behind the wheel of a car, truck, or SUV that puts you on the road to financial stability.