What Is The Lowest Amount I Can Have Financed For A Car?
Often people come across a car that is in their budget and become unpleasantly surprised
when they find out that the car they want must be paid for in cash. Cash that they dont have! Why cant I finance the vehicle that I want? Well, this is because the amount is too low for the financier. Typically a vehicle must be around $8000 to be financed by the banks. This is because they want to make sure that the amount to be financed is enough to make it worth their while. Although $5000 may seem like a lot of money to some people, the amount is too small for the banks when it comes to car loans. The vehicle that you are looking for must also pass the Safety Standards and requirements when it comes to kilometres and year of the car. Generally, the car shouldnt have more than 120,000 km on it.
One thing to remember too is that the lower capital cost of borrowing usually equates to a higher interest rate. This is because the investment from the bank only makes sense to them on a low amount if they are making profit by charging a high interest. Banks will also have limits on the term of the finance for vehicles in this category. They are usually for 36 months or even less. For example, if the interest rate on the car you are financing is around 14 or 15 % then the monthly payment is approximately $250 per month for a 3 year term.
Some used car dealers have a large selection of cars in this range. Your best bet is to look for cars that fit that important monthly budget of yours and ideally the car has low kilometres on it and will pass the Safety and Emissions tests. Another thing to consider when going with your newly financed vehicle are the other costs associated with the car. For example, the $250 per month doesnt stop there. You have to get insurance for your car, calculate any repairs you may encounter or general maintenance needed. Check to see what the fuel consumption is so you can get a rough idea of what you will need for gas. Also, look into see what kind of warranty options are available as they will also add to the monthly cost of your vehicle. The main thing is to know what your budget is and realize that that $5000 car you so desire may not be able to be financed but that if you go with a bit higher valued car, you still may be able to have the luxury of financing it and keeping it in your important monthly budget.
by: Rick Li
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