Are Auto Loan Terms Important in New Brunswick?

By John Hayden

One of the most expensive things you’ll ever buy, choosing a car (and then deciding how to pay for it) is a major financial decision.  Its ripple effects can extend for years into the future. Auto loan terms typically range from 36 to 72 months in Canada, with some as long as 96 months. There’s even a lender offering financing over a term of 120 months – that’s the same as a ten-year mortgage!

What’s the Best Auto Loan Term in Eastern Canada?

There’s no one-size-fits-all car loan term that encompasses the entire driving universe. But here are a few tips from the financing consultants at Hayden Auto Loans. They’ll be happy to steer you past common financial pitfalls, as you move towards making your dreams on wheels come true:

  • How much can you afford to spend on your car each month right now? Don’t forget to add other car-related expenses to the amount earmarked for your instalments, including insurance, parking, fuel, maintenance, and licensing fees. This is the third largest debt for most families, ranking right after mortgages and credit cards, so be realistic;
  • Plan for your future when choosing your auto loan terms, as family needs change constantly. A snazzy runabout for a singleton may be impractical in just a few years, with a couple of babies on board. At the other end of the timeline, a couple of empty-nesters may no longer need gas-guzzling seven-seaters that were once packed with kids and their gear;
  • Play it safe when deciding on an auto loan term, making sure you leave a generous margin for emergencies. On average, Canadian drivers allocate around $450 each month to paying their car loans, with several hundred dollars more for additional expenses;
  • Avoid negative equity when signing up for vehicle financing. Some makes and models depreciate faster than others (especially in the harsh Maritimes weather). This means that longer auto loan terms may lead to negative equity, with your car worth less than the outstanding amount;
  • Calculate the full costs of your car loan, and juggle the various factors involved. That’s because apparently insignificant details (like tenths of a percentage point in interest) can add up to thousands of dollars squandered unnecessarily during over the next few years.

How Do I Find the Best Car Deal in New Brunswick

Lenders come in several shapes and sizes. In places like Bathurst and surrounding areas, the main options are banks and credit unions, dealerships, and online agencies. Some automakers offer great deals on new car loans (especially just before launching new models). At times like this, interest rates may drop to 0%.

Although that seems like a no-brainer choice for a longer auto loan term, smart buyers still think twice.  They compare their savings on interest with their losses on depreciation, especially with that whopping 20% drop in market value as they drive off the lot.

Shorter Is Generally Better for Auto Loans in Atlantic Canada

As a rule of thumb, opting for a shorter auto loan term steps up your monthly payments, but saves you money in the long run on interest. Although longer auto terms may well be more appealing, with lower monthly instalments, they are often the more expensive option. The end-price of a vehicle may double during a 96-month auto loan term. This can leave an unwary buyer holding a virtually valueless asset that’s aged out of the market.

If you have limited savings for a down payment, a longer-term loan of 72 to 96 months might meet your purposes.  However,  you’ll need solid prospects of a steady cash flow that will be largely impermeable to economic meltdowns for close to a decade. Low monthly repayments let you save up for a healthy deposit on your next vehicle, particularly if you make sure that the small print allows for penalty-free early termination.

Closing Thought: The Hayden financing consultants confirm that choosing a shorter auto loan term can save you money on interest, despite higher monthly payments. Although longer-term loans may seem cheaper each month, your new ride could actually end up costing far more than you expected. Are you interested in getting a car loan in New Brunswick? Click here and fill out the form.

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