Financing a Used Car In Canada in 2025? Must Read

Having your own car can be a great way of living a happy life, it makes life easy as you can easily drive to any place you wish at any time. However, getting a car can be pretty expensive whether it's a new one or probably a used one. Whichever one, it costs a few bucks to get one, which if you don't have it at the time you need it, can be discouraging.

We all know that in Canada, used cars usually come with some price tags that can be scary to a low-income earner. This price tag is usually determined by factors such as the manufacturing year of the car, the model, how long it was used, and also the overall general condition of the car all play a vital role in the price of the car.

According to Loan Canada. The price of a used car in Canada is usually within the price range of $34,031 on average. When you look at that figure, it will take an average income earner some time to actually buy that with the bills piling up and other things to take care of financially. I believe you agree with me that this is expensive. However, the article is written to help you know how you can easily go about financing your used car in Canada.

All you need to do is to ensure that you read the entire guide to the end without skipping any part of it.

Also Read: How Does Reverse Mortgage Work in Canada?

Also Read: How You Can Get a Government Job in Canada in 2025 (Learn How)

How Used Car Financing Works In Canada (What You Need To Know)

As mentioned at the very beginning of this article, if you've been following the article, you'll remember I mentioned a used car in Canada averaging about $34k which is a huge chunk of cash for an average income earner in Canada. However, the way financing a used car works is by taking a loan from a money lender such as a bank or other financial institution and then using the loan to finance the car once you've been approved.

When you go for a car loan, you can borrow that money and use it to buy the car then you pay back the loan you're owing for a long period of 1-10 years depending on the type of loan and the lender.

If you look at this you'll agree with me that it's one best way of getting the car you want in Canada without much stress. This loan can be a great way of planning your financial life because instead of stumping up the full purchase price of the car, you're given the option to make regular monthly payments toward your car loan. To make things easier you can make a downpayment to minimize the amount you borrow. However, if you don't have any money, you can still go for a $0 downpayment option which is available too.

To go about financing your first used car in Canada, you need to take the following car financing steps into consideration.

Steps-By-Step Things To Consider When It Comes To Car Financing  And How It Works In Canada

These few steps are very vital and you should understand them properly and take them into consideration if you want to finance your first-ever used car.

Budgeting

Budgeting is very important in everything we do. This is why you need to compare different car loan options first for you to have a better understanding of how much you can afford on a monthly basis. I'll advise you never to spend more than 10% of your income on your car, if you do, then you should be ready for some serious financial predicaments.

Get Your Car Loan Options Right

Before you think about financing your used car through either a dealership or even picking your car online, one thing you need to get first is pre-approval for a car loan. When you do that, it will allow you to easily compare different offers and decide which one is best for you. Despite financial institutions like the bank offering the best rates when it comes to used car financing, your income debt, and credit scores play a major role because it needs to be in good condition. However, if you have a fair credit score, you can go for other alternative lenders. One thing you need to know is that these lenders usually have a higher rate when compared to the banks but their requirements and terms are very flexible.

Purchase Your Used Car

This is the step you must have been waiting for right? I guess it is. Once you have been able to find your used car through a local dealership or through other means such as an online retailer like CLUTCH, you can then go ahead and make use of car-pre-approval to secure a loan through your bank or an alternative lender. If that is not very convenient for you, you can also make use of your car dealership. If they approve you, you can then use the funds to finance your used car.

With all that said, let us look at some common questions you may have in mind regarding financing a car in Canada.

Can I Finance a Used Car In  Canada?

Yes. You can finance a used car and the entire process is easy and straightforward. When it comes to financing used cars in Canada, there are several ways to go about it. This mainly depends on the type of car you're financing and your need for the car. All of this will determine if you're qualified to get that car.

One of the very common ways of financing a used car in Canada is through a dealership, aside that another way to go about that is using a car loan. Some financial institutions such as banks and other money lending platforms offer this. One of the setbacks with using these lenders is the high rate. This happens as a result of the loans being an unsecured loan.

How Can I Finance a Used Car In Canada?

There are several ways you can finance a used car in Canada. There are three(3) common ways car financing is done in Canada. You can take advantage of any of them. However, remember that they all come with their own advantages and disadvantages. This is why you need to take your time to understand how this works so you can make the right financial decision when it comes to financing a used car in Canada.

Below are the three different ways you can finance a used car in Canada.

• Car financing using a dealership
• Car financing using bank or credit unions
• Car financing using an online lender 

Car Financing Using Dealership

Getting a car directly through the dealership where you're buying your car is another great option for financing a car in Canada. The dealership way of financing a car in Canada is usually quick way and very convenient because it allows you to easily buy any used car of your choice on the spot. These car dealership loans usually have a loan term of 3-7 years for those with good or bad credit. However, there may be some wiggle room to negotiate a better rate.

One thing I'll advise you is to take your time and compare your loan offer with that of other dealers to know which one is better for you. Don't just accept an offer because you're eager to be on a wheel of your own forgetting that you have to pay for it, so typically it is your money you're spending in the long run.

During the comparison, you'll get to realize that there is always room for flexibility when it comes to missed payments or early loan repayment. 

Pros Of Buying a Used Car Through Dealership In Canada

• It is very convenient
• Dealers help with the entire documentation process
• There is room for negotiation such as sales price, interest rate, loan term, or vehicle upgrades
• Bad or fair credit is eligible

Cons Of Buying a Used Car Through Dealership In Canada

• Interest rates are usually high
• Hidden fees such as documentation fees 
• A down payment is usually required

Car Financing Using Bank or Credit Unions

Using the bank and other financial institutions such as the bank is a great way to finance your used car. A lot of the major banks you see around in Canada offer used car financing. They try to make the entire process easy and straightforward for those who already own a bank account with the bank. 

The banks are known to offer a used car loan of up to eight years. However, the only setback is the credit score. If you know you have a bad or fair credit score, then this option is not for you because these financial institutions are more focused on those with excellent credit scores.

Pros Of Financing a Used Car Through a Financial Institution Such As Banks and Credit Score

• The process is usually easy, straightforward and convenient
• The banks are usually flexible when it comes to missed payments, making extra repayments, or paying off your loan early
• You have the option to decide your payment frequency.

Cons Of Financing a Used Car Through a Financial Institution Such As Banks and Credit Score

• The loan application and approval take some time.
• Banks and credit unions usually have longer application and approval processes.

Car Financing Using An Online Lender 

The online lending system is evolving every day due to how technology is changing the world. You can now easily get a used car loan from online lenders that provide finance for used cars. With these lenders out there, it is usually easy to compare loan rates and features online. Aside from that you can get pre-approval for multiple offers which makes it easy to shop around.

Using online lending platforms, you can choose from a range of competitive used car loan options. Some of these online loan companies usually offer loan terms ranging from one to eight years.

Pros Of Using An Online Lender To Finance a Used Car

• The loan rates are competitive
• The application and approval  process is easy and fast
• Bad credit is allow
• The loan can be used for buying from private sellers
• you have the option to shop and compare

Cons Of Using An Online Lender To Finance a Used Car

• The rates are on the high side
• Loan fees are not usually clear
• Some pre-approval uses hard credit checks which affect credit scores.

Can I Buy a Used Car Online In Canada?

Yes. In today's world, technology has made it easy for people to run almost any kind of business online. If you wish to purchase a used car online, you can make use of the option of buying online from the car manufacturer directly, through a dealership, or even an online used car dealer such as CLUTCH.

When you make use of a company such as Clutch, you stand to benefit from it in several ways. Not only you can pick your type of car from their inventory, but you can also as well apply for financing of the car using their platform. Isn't that great?

This makes Clutch one of the most sought-after one-stop shops where you can perform all of your car transactions in one place. Another thing that makes Clutch a great option is the fact that they have a return policy. When you buy from them and you happen to not like the car, you can return it within the first 10 days without any penalty.

How long can you finance a used car in Canada?

You can finance a used car in Canada for 1-10 years when using a financial institution like a bank or credit union,  3-7 years when using a dealership, and 1-8 years when using an online lender.

This financing depends on the lending platform you're using or the lender. Make sure you do your own research with the lender you're using to know how long you can finance a used Car in Canada.

Conclusion

A car plays a very important role in today's world. It makes life easier, it allows you to earn respect and so many more. One thing you need to know is never to spend more than 10% of your income on a car, this is why you can use other flexible options like car financing to get the used car you always wanted while you still live your normal life without your finance being affected in any way.

Take your time, be patient, and really think things through before buying a car just because of the way it looks. Remember, your financial health should always take priority. If you’re in the market to purchase a new or used vehicle, Loans Canada can help. We’ve partnered with lenders all over Canada who can help you get behind the wheel of a car that’s right for you. 

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