How Loans work
Toronto Auto Mall & Get My Loan Canada
Buyers Manual for How Car Loans Work & How car Deals Work
⦁ Car loan Value
Car loan value is important because it dictates the maximum amount that may be financed on a new or used car purchase, relative to the manufacturer’s suggested retail price (MSRP) or book value of a vehicle. Loan value is established so that the lender can limit the amount it finances on a depreciating asset like a car. A lender must be wary of the loan amount it extends to a borrower on a particular vehicle, because writing a loan for an amount greater than a vehicle’s true market value increases a buyer’s likelihood to default on the loan. You can find great deals on Used vehicles at Toronto auto mall, and they can also give you information on the loan values used by different banks.
⦁ Loan to Value
The loan-to-value (LTV) amount is the total amount financed, relative to the value of the collateral. In a perfect car-buying world, the LTV on all loans would be under 100 percent, meaning that no buyer would finance more than 100 percent of the MSRP for new cars, or Black Book Value value for used cars. In reality, lenders commonly finance up to 120 percent of the value of a vehicle, and some, like GM Financial Canada, finance up to 150 percent of the MSRP of a new vehicle on a situational basis.The loan value of a vehicle offered by a bank or lender varies according to the type of car you intend to purchase, your credit history, monthly income and other financial transactions, like your mortgage payment. Since most dealerships offer financing options, it’s important to do your own research to find out which lender gives you the lowest interest rate on your loan.
⦁ Credit Check
All of this is done with what is known as the credit check which you are asked at the start of any new or used car interview. A salesperson or manager will ask you for your name, address, phone, monthly income and your Social insurance number. They then run a “bureau” on you, to see what your credit history looks like. This also helps the salesperson to steer you toward a vehicle priced so you can afford it.If everything looks okay, as in you can pay your loan back on time, then the chances are good you will get your loan and be on your way.
⦁ Vehicle History Report
A vehicle history report obtained through companies like car proof and Carfax can be very helpful when determining a specific car loan value. This plays a big role in subprime finance If you do not have a good credit score you will not qualify for prime programs and rates.Any vehicle with more that $5000 worth of claims or estimates will not be finance under the suprime guidelines. This report gives you more detailed information on a particular car. While a vehicle may look to be in good or excellent condition, the vehicle history may reveal otherwise. By VIN inputting the vehicle identification number of Vin number through carproof or car fax you’ll receive information on the number of prior owners, any prior accidents or damage to the frame, title problems such as salvage or flood, service records, etc.
⦁ Interest Rate and Terms
A consumer shopping for a $25,000 car, who must finance $28,250 to cover taxes, means negative equity and registration fees or purchased warranties have a LTV of 120 percent. Although most lenders would approve a 120 percent LTV loan, provided the buyer had a strong enough credit history, it would be at a higher rate than a buyer who only needs to finance 100 percent LTV. Buyers who place large down payments and finance much less than the fair market value of a vehicle may also have higher interest rates, as the lender will be unable to make interest on a large balance, so they simple raise the rate to recoup the otherwise lost profit.
⦁ Down Payments
If you have visited dealerships and had trouble getting an approval because you must finance much more than the car’s loan value, you may need a down payment. For example, a prospect looking to finance $40,000 to purchase a vehicle with a market value of $30,000 would be at 133 percent LTV. Many lenders would not approve this loan. If the lender would approve the loan at 120 percent LTV, the buyer must arrange a down payment of $4,000, to bring the LTV to 120 percent. Determining the exact requirements for approval varies from lender to lender, and the bank may not discuss these matters with the consumer. If this is the case, it is best to sit down and discuss your situation with a dealership finance manager.
⦁ Used Cars
Calculating the loan value on a used car is more complicated than on a new car. Some lenders base their loan valuations on the fair book value of a used car, equivalent to the Black Book value fair trade-in value. On used vehicles that are only one or two years old, the lender may base their valuation on the new vehicle invoice price, or a certain percentage of the invoice price. Say, for example, 80 percent of the like-new invoice price. This may limit the total amount that can be financed on a used vehicle. In any case, loan value is calculated differently by each lender, so be sure to ask a finance representative at your dealership if you have any specific questions.
⦁ Certification (Safety Inspection)
Ontario Requires all Used vehicles to go through (ahmeds part)…………………..
⦁ Warranty Protection
Not all components of the vehicle is checked through the certification process …….
⦁ Auto Loans
As a buyer, you should find out the amount of money you can spend on a car purchase. This includes taxes, fees and insurance costs. Before you’re offered any loan rate on a used car from a lending institution, you will be asked for personal details such as social insurance number, credit history, monthly income and tenure of employment. Lenders will ask for information on mortgage payments to find out your financial position. If you choose to purchase a car from a used car dealer, the dealer will offer you a deal on an auto loan. Auto loan rates are the same for every dealer, At Toronto auto mall we buy down bank rates to make it more affordable and attractive for buyers to purchase our vehicles.In order to determine if this deal is worthwhile, do your own research before heading to the dealership.
⦁ GAP Protection
Protecting your loan is also important…………..
⦁ Determine Your Interest Payment
You need a copy of your credit report to be able to estimate what interest payment you will be charged. When you have no credit or poor credit, you need to pay a much higher interest payment and perhaps even a higher down payment. One of the many online car loan calculators Such as the one on www.getmyloan.ca can give you an idea of what interest rate you might be expecting.
⦁ How Long Do You Need the Loan For?
The length of the loan is a deciding factor in how to find your car loan value. The longer you take to pay off your loan, the more interest you accrue. A loan for five years will cost you quite a bit more than a loan over a 2 year term. To reduce this amount, you can add extra payments toward the principle amount, thus shortening the loan.
⦁ How Can I Find the Auto Trade In Value?
The auto trade in value is available to you on line at www.canadianblackbook.com To find the trade in value for your car, go to the used car side of CBB and plug in the particulars for your car and give it an objective look over. Everyone wants to see their car as excellent. The industry, however, uses fair. Look at the range that is returned when you’ve finished the form and take the “fair” value. Then, subtract about $2,500 for the investment the dealership will be making in your car, and you have the trade in value of your vehicle.
⦁ How Can I Find a Car’s Resale Value?
A car’s resale value is the trade-in value, plus any work that must be done, plus an 8-15 percent net profit. That is the formula any car dealership uses when determining whether a vehicle will be retailed or auctioned. If the investment in repair is too large, it is auctioned. If it is not too large and the body is in good shape, then it is held for resale. The final net value is arbitrary and may vary a percentage point or two across the country. To gain a better appreciation, go to cbb.com and fill in the used car form. Check “fair” value, adding $2,000 for repairs and tagging on 8-15 percent.
⦁ Why Is there a Difference in a Vehicle’s Trade In and Resale Value?
Vehicle trade in value is a cash component of a car sale. It is the amount of money a dealership is willing to lay out for your car in a deal on a new car or used car. It is real money, as checks are cut and balances are paid off by the dealer. The trade-in sets the resale value of the vehicle. Dealers will automatically mark up a traded vehicleif it survives musterroughly 30 to 35 percent. Of this markup, the dealership is figuring how much they will actually have to invest in the vehicle to make it sellable at a top price. Of the markup, the dealership will see about 8 percent after next sale.
1170 Sheppard ave west,Unit 36-37,Toronto,On,M3K 2A3
www.torontoautomall.ca (647) 748-5755
Prep By: Payam Safadel (Business Manager)