Press release
Source : Office de la Protection du Consommateur
QUEBEC – The 2010 models have arrived. Dealers are offering not only so-called unbeatable prices, but also extremely low financing rates, sometimes even as low as 0%. Buyer beware! To get a good deal, the Quebec Consumer Protection Agency (Office de la protection du consommateur) recommends that buyers be aware of potential pitfalls and properly evaluate the costs related to financing a purchase.
Dealer financing
One of the most common ways to obtain a vehicle is by purchasing it in instalments. This is the case, for instance, when financing the purchase of a car with the dealership’s credit company. In return, the merchant retains ownership of the vehicle until you have paid the amount in its entirety, despite the fact that you took possession of the vehicle at the time of purchase. The car serves as a guarantee that you will pay off the debt.
Here’s a tip: read the fine print contained in advertisements. That is often where the terms and conditions of the purchase and fees are hidden, such as the down payment required to benefit from low monthly payments. And especially, beware of claims like “0% Financing”. In actual fact, the bill could be considerably higher that what you had expected, as you have to consider the credit rate.
Credit rates
The Consumer Protection Act requires merchants to advise consumers of all sums they will have reimbursed at the end of the contract on top of the principle sum borrowed. These are known as credit rates. They notably include the amount of interest, accidental death or disability insurance (when taken out directly in the credit contract), various administration fees related to the credit as well as the reduction value or discount tendered to consumers paying in cash. The credit rate is the amount of all credit charges expressed as a percentage. Be aware that the law requires that this rate appear on the financing contract the buyer signs.
Borrowing from a financial institution
Borrowing from a financial institution and taking advantage of the discount offered by the dealer for cash payments can sometimes be more worthwhile from a financial point of view than the rate offered by the automaker’s credit company. You may find yourself hesitating between a car loan and a personal loan. Legally, a car loan is a purchase in instalments. The personal loan is more flexible, because you can sell your car at any time without asking permission from the lender.
If you go for the discount, check to see if it applies before or after the tax calculation. You save more “before” because you pay fewer taxes.
Long-term leasing with call option
Ads for long-term leases emphasize the low monthly fees, the length of the contract and the peace of mind associated with this option, but they fail mention the total cost of the vehicle financing – very important information indeed. To discover the amount, add up the sum paid before the beginning of the lease and if need be the value given to the trade-in vehicle, all monthly payments and the residual value. Don’t forget to inquire about mileage allowance and excess mileage fees.
Calculation tools
One of the most efficient ways to find out if you’re getting a good deal is to compare the total amounts of the different financing options.
Using a specialized calculation tool for auto financing can make things easier. The web site of the Office de la protection du consommateur contains various tools in the “Véhicules” section (French only).
Additional information is available in the “Chroniques de consommation” section under the “Salle de presse” tab.
photo:Jupiter Images
Source : Office de la Protection du Consommateur
QUEBEC – The 2010 models have arrived. Dealers are offering not only so-called unbeatable prices, but also extremely low financing rates, sometimes even as low as 0%. Buyer beware! To get a good deal, the Quebec Consumer Protection Agency (Office de la protection du consommateur) recommends that buyers be aware of potential pitfalls and properly evaluate the costs related to financing a purchase.
Dealer financing
One of the most common ways to obtain a vehicle is by purchasing it in instalments. This is the case, for instance, when financing the purchase of a car with the dealership’s credit company. In return, the merchant retains ownership of the vehicle until you have paid the amount in its entirety, despite the fact that you took possession of the vehicle at the time of purchase. The car serves as a guarantee that you will pay off the debt.
Here’s a tip: read the fine print contained in advertisements. That is often where the terms and conditions of the purchase and fees are hidden, such as the down payment required to benefit from low monthly payments. And especially, beware of claims like “0% Financing”. In actual fact, the bill could be considerably higher that what you had expected, as you have to consider the credit rate.
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Credit rates
The Consumer Protection Act requires merchants to advise consumers of all sums they will have reimbursed at the end of the contract on top of the principle sum borrowed. These are known as credit rates. They notably include the amount of interest, accidental death or disability insurance (when taken out directly in the credit contract), various administration fees related to the credit as well as the reduction value or discount tendered to consumers paying in cash. The credit rate is the amount of all credit charges expressed as a percentage. Be aware that the law requires that this rate appear on the financing contract the buyer signs.
Borrowing from a financial institution
Borrowing from a financial institution and taking advantage of the discount offered by the dealer for cash payments can sometimes be more worthwhile from a financial point of view than the rate offered by the automaker’s credit company. You may find yourself hesitating between a car loan and a personal loan. Legally, a car loan is a purchase in instalments. The personal loan is more flexible, because you can sell your car at any time without asking permission from the lender.
If you go for the discount, check to see if it applies before or after the tax calculation. You save more “before” because you pay fewer taxes.
Long-term leasing with call option
Ads for long-term leases emphasize the low monthly fees, the length of the contract and the peace of mind associated with this option, but they fail mention the total cost of the vehicle financing – very important information indeed. To discover the amount, add up the sum paid before the beginning of the lease and if need be the value given to the trade-in vehicle, all monthly payments and the residual value. Don’t forget to inquire about mileage allowance and excess mileage fees.
Calculation tools
One of the most efficient ways to find out if you’re getting a good deal is to compare the total amounts of the different financing options.
Using a specialized calculation tool for auto financing can make things easier. The web site of the Office de la protection du consommateur contains various tools in the “Véhicules” section (French only).
Additional information is available in the “Chroniques de consommation” section under the “Salle de presse” tab.
photo:Jupiter Images