Understanding Car Loans with Ontario’s Autohouse Kingston

Oftentimes when we don’t understand something—especially when it comes to finance—the concept can be intimidating or frightening. However, when it comes to understanding car loans, there’s no need for things to be overwhelming or complicated. Regardless of your current credit situation, understanding how vehicle loans work is an easy way to purchase with confidence—and to even help you begin rebuilding your credit score, if it’s damaged. Simply read on, and let the knowledgeable team from Autohouse Kingston break down the basics of car loans.

How does a car loan work?

Car loans are really quite simple, and revolve around three factors:


The principal, the first major factor in your vehicle loan, is the total cost of the vehicle you plan on purchasing. Now, that doesn’t just mean the sticker price, but rather the cost of the vehicle as well as any fees added by the dealership or lender, accessories, add-ons, options, warranties—you get the idea. 

Many lenders that target customers with subprime credit will add extra fees on top of the cost of the vehicle, in an effort to make more money while protecting themselves against lending to higher risk individuals. When budgeting for a car loan, it’s important to take all of these costs into account, and to not simply look at the sticker price of the vehicle itself.


The second factor you’ll want to be aware of when it comes to a car loan is term. Term is simply the amount of time you’ll be making payments on the vehicle’s principal. This time will be set out in months, and can range from 12 to 96 months—though the most common terms are 36 to 72 months. 

Term is an incredibly important consideration when you’re signing up for a car loan, and both long and short terms have their benefits. With a short term loan, you’ll have higher biweekly or monthly payments but you’ll end up paying less in interest. Conversely, a longer term ensures a smaller, perhaps more affordable biweekly or monthly payment, but you’ll pay more interest over the term of the loan. With your budget in hand, our team can help you determine which term will be best for your situation.

Interest Rates

The third factor, and perhaps the most variable, playing into your car loan is interest rate. This is a percentage calculated by the lender, based on your credit history, that they will charge you to borrow from them. The interest rate is applied to the principal, and split up over the term. This is why getting a shorter term loan will cost you less in interest, while a longer term loan will result in more payments and more interest.

Again, this is where your credit history will come into play. If you have a perfect credit score, you’ll qualify for a lower interest rate. On the other hand, if you’ve got subprime credit, you can expect to pay a higher interest rate. Some lenders and dealerships will operate under the promise that “we’ll get you approved no matter what”, only to charge exorbitant interest rates. This isn’t really a tenable solution, especially if you’re already experiencing credit issues. This is also why we’ll happily work side-by-side with you to find both a vehicle and an interest rate that fits your budget.

Why come to Autohouse Kingston for your car loan?

Car loans can seem like a complicated proposition from the outside, but really they’re just a balance of three main factors. Knowing those factors can not only help remove some of the anxiety related to applying for a car loan, but they can also help you make a smart decision to improve your credit. Here at Autohouse Kingston we believe in providing a transparent experience that benefits you, our customer, and helping find a vehicle that suits your lifestyle and budget. You can get in touch with the team at Autohouse Kingston here, or simply start by filling out our online credit application form found here. Not only is it quick and secure, but it can help us start the process of finding you a new (and better) vehicle today!