How To Finance A Hybrid Car

How To Finance A Hybrid Car

Are you looking to reduce your impact on the environment and want to know how to finance a hybrid car? You’ve come to the right place.

There has been an increase in hybrid and electric car sales over recent years. This rise in popularity is no surprise given the current state of our environment and the level of carbon emissions. It may also have something to do with the Canadian government’s incentive plan encouraging the purchase of hybrid and electric cars.

That said, making the decision to move from a gasoline-powered vehicle may seem like a daunting task. But it’s less complicated than you may think, and we are here to guide you through the process.

Choosing the best hybrid car for your needs is the first step. You’ll need to obtain your credit record to determine what you can afford. Bear in mind, there will be upfront costs. Your credit score will help in establishing which type of lender to approach. Then you can get your documents together for your hybrid car finance application. 

Below, we’ll explore the ins and outs of how to finance a hybrid car. Starting with choosing the most suitable vehicle for your specific needs. Then we’ll take you through the steps required to apply for the finance you need.

Our guide on how to finance a hybrid car

How do I choose the best hybrid car?

First, we should take a closer look at the types of hybrid cars available to you. There are a few options for those looking into how to finance a hybrid car. Each option offers different functions and benefits, as follows:

Plug-in hybrid cars (PHEVs)

These comprise both an electrical battery pack and a gasoline fuel tank. These are great for those who need to travel longer distances. They’re also beneficial if your region does not have enough public charging points in place for electric cars. This hybrid would lower your overall fuel costs. When looking at how to finance a hybrid car, note that a PHEV will offer you some peace of mind. The reason being that you won’t need to worry about the battery going flat out on the road.

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Series hybrid cars

Series hybrids house a small gasoline tank along with the electrical system. However, this gasoline is only present to help charge the battery pack when required. The vehicle is, therefore, only powered by electricity. When investigating how to finance a hybrid car, know that the series hybrid would be kinder on the environment.

Parallel hybrid

This type of hybrid vehicle is probably the most common, which may be helpful to note when exploring how to finance a hybrid car. It contains a standard gasoline engine, as well as an electrical system with a battery pack. These two systems operate in harmony with each other to power the car. You would enjoy some savings in terms of fuel costs and would reduce carbon emissions a little too.

Given the above hybrid varieties, you must consider your objectives when selecting the car. Think about what you’ll be using the vehicle for. And, consider why you’ve opted for a hybrid car instead of a gasoline car.

Where can I apply for car finance?

At this point, you should have an idea of the type of hybrid car that best suits your needs. Next, it’s time to find out what kind of loan you qualify for. While establishing how to finance a hybrid car, it’s essential to know what you can afford. 

You’ll need to begin by approaching a local credit bureau to confirm your credit score. Upon request, the credit bureau will provide you with a full credit report detailing your risk profile. Once you know your overall credit score, you’ll have a better idea of where to apply for a car loan.

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Banks and credit unions

If your credit score is above 600 and you have a good income, you should qualify for a loan without hassles. In this instance, it would be to your advantage to apply for a car loan through a bank or credit union. When assessing how to finance a hybrid car, it may help to know that these traditional lenders tend to offer larger loans. And the loan will usually be over a longer-term, at a reasonable interest rate. 

However, it may be tricky to secure a loan from a traditional lender if your credit score is below 600. With a bad credit score, you may have a better chance of obtaining finance from a car dealership or alternative lender. 

Dealership

Loans through dealerships come with perks, such as the option to trade in your current car or make a down payment. If you’d like to know how to finance a hybrid car, you should note that you will pay higher interest rates through a dealership. Dealerships also only offer car loans over shorter terms, which means you will pay more per month.

Alternative lender

However, obtaining a car loan from an alternative lender is often more manageable when you have a low credit rating. As a high-risk borrower, expect a smaller loan amount with a shorter repayment term and a high-interest rate. It should be noted that some of these lenders may not offer car loans specifically. In this case, you’ll have to opt for a personal loan.

What are the requirements to apply for car finance?

Perhaps the most obvious requirement is your credit record and proof of income. No lender will provide you with a loan without verification that you can pay them back with interest.

To qualify for vehicle finance in Canadian, you must be at least 18 or 19 years old, dependent on your province. You’ll need to provide the appropriate identification documentation to verify this.

You will also be required to provide a valid driver’s license when applying. A clean driver’s record is also essential when establishing how to finance a hybrid car.

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When applying for a car loan in Canada, you must provide documentation to prove that you have driver’s insurance coverage. It is against the law for Canadians to drive a vehicle without driver’s insurance. Therefore, if you don’t have insurance in place, you will not be eligible to purchase that hybrid car.

If possible, try to secure a pre-authorized debit (PAD) using approved EFILE software. A PAD gives taxpayers the ability to set funds aside through the Canada Revenue Agency for payment. When giving your lender a PAD for your down payment, they can rest assured that the money is available for them when payment is required. 

What are the costs associated with car finance?

Most people are aware of the monthly repayments they’ll have to make after taking out a loan. However, some may not realize that there are other upfront costs involved. These must be included in your planning when evaluating how to finance a hybrid car.

Down Payment

Your hybrid car loan will likely require you to pay a down payment upfront. This payment usually amounts to 10% to 20% of the value of the vehicle. That could be a sizeable sum of money, depending on the price of the car you’ve chosen to buy.

Interest

Your monthly repayments will not merely be the car’s total price divided by the number of months in the loan term. Your lender must make a profit on the loan, so they will add interest to your premium each month. It will also add a considerable amount to the total price over the loan term.

Sales Tax

When discovering how to finance a hybrid car, you should note that the price tag shown is not the amount you’ll pay. It’s common practice for dealerships to exclude upfront costs such as sales tax from the advertised cost. Sales tax differs a little from province to province. But is usually made up of a combination of Goods and Services, Harmonized, and Provincial sales tax.

Other fees

There are specific fees involved as well. Such as those for the registration of documents and licenses that must accompany the hybrid. You may even incur additional costs for vehicle inspection, roadworthy tests, and delivery if you don’t collect the car yourself. There will also likely be administration fees for the generation and submission of your contract agreement.

What are the benefits of buying a hybrid car?

The overriding factor for manufacturing and owning a hybrid or electric car comes down to carbon emissions. It is now up to us to save the planet as best we can by reducing our impact on the ecosystem.

The growth in popularity of hybrid vehicles will have an enormous influence on decreasing the levels of pollution. This is why many purchasing new hybrid vehicles can receive sizeable rebates on a federal and provincial level. And why many have made a move from regular gasoline to hybrid cars.

However, when examining how to finance a hybrid car, you should know a cost-saving advantage is attached. The cost saved on fuel alone could be a motivating factor for some. But to benefit in this way, you must consider the cost of the hybrid versus the insurance and fuel costs over time.  Some hybrids will see you save on insurance and fuel within 2 to 3 years. While with others, it could take as long as 8 years before you start to reap the cost benefits. In addition, you could earn yourself a rebate of anywhere from $2500 to $5000 and more, which is not to be ignored.

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How to finance a hybrid car

how to finance a hybrid car - comparewise

How to finance a hybrid car5 minutes

1. How do I choose the best hybrid car? - comparewise
1. How do I choose the best hybrid car?

  • Plug-in hybrid cars (PHEVs)
  • Series hybrid cars
  • Parallel hybrid

2. Where can I apply for car finance? - step 2
2. Where can I apply for car finance?

  • Bank and credit unions
  • Dealership
  • Alternative lender

3. What are the requirements to apply for car finance? - comparewise
3. What are the requirements to apply for car finance?

The most obvious requirement is your credit record and proof of income.

4. What are the cost associated with car finance? - comparewise
4. What are the cost associated with car finance?

  • Down payment
  • Interest
  • Sales Tax

5. Shop your car online - comparewise
5. Shop your car online

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FAQs about Financing a Hybrid Car

What is a hybrid car?

Hybrid cars are run by combustion engine and electric motor which uses batteries. It’s suitable for those wanting to reduce their impact on the environment.

How do I choose the best hybrid car?

It depends on which hybrid cars are available to you. Some examples of hybrid cars are:

  • Plug-in hybrid cars (PHEVs)
  • Series hybrid cars
  • Parallel hybrid cars

Look into them and see which ones are available and suited for you.

Where can I apply to get a hybrid car finance?

You can apply through banks, credit unions, dealerships and other lenders available to you. Banks and credit unions are the best way to qualify for a loan if your credit score is above 600. If you decide to go with a dealership, you would get charges higher interest rates but you can trade in your current car and make down payments. Alternative lenders on the other hand are manageable for those who have a low credit rating but expect to receive high-interest rate, smaller loan amount and shorter repayment term.

What are the requirements to apply for car finance?

The important requirements for a start would be your credit record and your statement of income. You must be at least 18 or 19 years old depending on where you live in Canada. Please note that you must also provide a driver’s insurance coverage if you’re applying for a hybrid car loan.

What are the costs associated with car finance?

Cost include downpayment, interest, sales tax and other fees that are mainly discussed by your financial institution. The down payment will usually cost 10%-20% of the value of the vehicle while the interest rate include the car’s total price divided by the number of months in the loan term, as well the lender’s interest to your premium monthly. Sales tax will differ depending on where you live so it’s best to check first.

July 29, 2021
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