With the benefits of cleaner air, lower fuel costs, and possible rebates, who in Canada wouldn’t want to find out how to finance an electric car?
While many are keen to go ‘green’, the Canadian government is working hard to make it easier for everyone to do their part. In fact, making the move from a gasoline or hybrid vehicle to a fully electric car could now prove to be a serious cost-saving exercise.
Financing a new electric vehicle couldn’t be more accessible. With the most significant manufacturers on board, you’ll easily find the perfect car for your needs. Securing the right lender is a sinch once you know your credit score and what you qualify for. If you’ve planned your finances well and know the incentives available, you’ll be well on your way.
There are, however, a few things to consider when researching how to finance an electric car. But, once you understand your needs and have budgeted accordingly, you’ll be set to buy the car of your dreams.
Following our simple guide below, you’ll be driving away into the sunset with your shiny new electric car in no time.
As mentioned, driving a fully electric car has far less of an impact on the planet’s deterioration. With a zero-emissions vehicle (ZEV), you will not be adding to the worldwide pollution dilemma. Owning an electric car offers a means to be responsible and contribute to restoring the ecosystem.
There are also financial benefits associated with buying an electric car. The most obvious being the savings you’ll enjoy from not having to purchase fuel. There will be a cost associated with charging your vehicle at a public charging station. But most ZEV owners will likely have a charging station set up at home too. And, if you only plan to use the vehicle for the city and short distance travel, you’ll save money.
Added to this are the incentives you might qualify for, courtesy of the Canadian government. Rebates are available on both a federal and provincial level for certain provinces, which could see you save thousands on your purchase. But we’ll delve into these incentives a bit later.
Other advantages are that electric cars are generally safer, quieter, lightweight, and have a good resale value.
Let’s explore the electric vehicle options available to you as you unearth how to finance an electric car.
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There are two main types of electric cars on the market. There are battery-powered ZEVs, and there are hydrogen fuel cell-powered electric vehicles (FCEVs). As you learn how to finance an electric car, you’ll discover that the type of power source you choose depends on your needs.
With battery-electric cars, there are zero emissions and liquids involved. Most battery packs on new models will carry you up to 250 miles (about 400 kilometres) before they need to be recharged. That said, some Tesla models can drive for up to 350 miles (about 550 kilometres) on a fully charged battery.
When it comes to FCEVs, they carry pure hydrogen gas, which is used to power the vehicle’s electrical system. These electric cars can travel up to 300 miles (about 450 kilometres) on a full tank of hydrogen gas.
While an FCEV is more efficient than a regular gasoline-powered vehicle, it is less efficient than a battery-electric car. However, it will cost you more to fill up with hydrogen gas than to charge a battery-powered model at home.
All the major car manufacturers have at least one electric vehicle on offer, including high-end brands such as Porsche and Mustang. Suffice to say, electric cars come in all shapes and sizes, be it a hatchback, sedan, family, sport, or even utility and commercial.
When exploring how to finance an electric car, you should know that new ZEV prices start in the region of $40,000-$45,000. And the Volkswagen e-Golf and Mini Cooper SE are popular, cost-effective options.
There are numerous vehicle models in different price ranges to choose from. You’ll need to take a closer look at what you can afford, upfront and month-to-month. You should also consider the primary use of the vehicle to determine the right fit for you.
When you have a clearer idea of the type, price range, and electric car model you want, it’s time to think about financing. The first step here is to approach the credit bureau to determine your current credit score.
If you’ve managed your finances well over the years, you will likely have a score above 600, which is considered good. In this case, you should not have any trouble obtaining a loan through a bank, trade union, or vehicle dealership.
Traditional lenders, such as banks and trade unions, will probably offer you more favourable terms than dealers. You’ll enjoy lower interest rates and longer loan terms through a traditional lender.
Suppose you find yourself with a credit score less than 600. In that case, you still have the option of approaching a dealership or alternative lender for a loan. The terms may not be as attractive, however, partly because you would be considered a high-risk borrower.
These lenders will offer shorter loan terms and higher interest rates, dependent on your risk profile. While discovering how to finance an electric car, you should also note that some alternative lenders don’t offer car financing. In this case, you’ll have to settle for a personal loan, which may prove to be a less complicated process for you.
When approaching a lender to identify how to finance an electric car, they will ask you to provide them with specific documentation. These documents serve to prove your eligibility and determine your risk profile for the loan.
We’ve already discussed the need to determine your credit score. However, your lender will likely need you to produce a full credit report for them to examine. Again, this can be obtained from the credit bureau.
In Canada, depending on which province you’re in, you must be at least 18 or 19 years old to purchase and drive a vehicle. Therefore, you’ll need to provide the lender with proof of identity in the form of an identification document.
Lenders will also ask you for your driver’s license, which is essential to know when determining how to finance an electric car. As you learn how to finance an electric car, you should be aware that they’ll check your driver’s record too. A clean driver’s record is a must for any vehicle buyer.
Driver’s insurance is mandatory for any vehicle owner in Canada to ensure that you are covered in the event of an accident. So, as you review how to finance an electric car, know that you’ll have to show proof of insurance.
Some financial service providers may ask you to show them 3 to 6 months’ payslips as proof of income. This is to verify that you can afford your repayments after you’ve taken ownership of the car.
In addition, a pre-authorization debit (PAD) might not be essential, but it won’t hurt to obtain one. This will give the lender a bit more peace of mind, as it will stand as proof that you can cover the upfront costs involved.
If you’re buying an electric car, the good news is that the Canadian government initiated a program that could help you save even more. The government launched a 3-year $300M incentive program in May 2020, known as iZEV. Therefore, as you explore how to finance an electric car, you should consider the potential incentives.
The idea is to encourage individuals to go ‘green’ by choosing zero-emissions electric care over a traditional gasoline car. Therefore, Canadians looking to purchase a ZEV could enjoy a sizeable rebate on their purchase.
Electric vehicle buyers can enjoy rebates of up to $5000 on their purchases on a federal level. To qualify, however, the vehicle must be brand new and valued at less than $45k
However, on a provincial level, regions such as British Columbia, Quebec, and Ontario offer buyers extremely attractive rebates. There are, however, specific requirements that must be met, but these differ from province to province.
Whatever your rebate, you will receive it through the dealership where you purchase your electric car. This way, you won’t need to worry about doing any additional paperwork or filling in application forms to obtain the incentive.
It should be noted that there are also incentives available for those who install a charging station at their home. Another thing to note while investigating how to finance an electric car is that home charging stations also come with tax benefits.
When purchasing any vehicle, there are some additional costs you need to keep in mind. These are not always obvious to those buying their first car. And they must be included in your financial planning before you buy your vehicle.
The largest of these costs is the down payment, which stands as a form of security for the lender. The down payment is an upfront cost, usually to the value of 10% – 20% of the car’s purchase price. If, however, you can afford to pay more than this upfront, you should. The bigger your down payment, the less you will have to borrow, and the less you will have to pay per month.
Another cost that must be considered is the interest. All loans incur interest, which varies from lender to lender and is often determined by your risk profile. If you’re trying to understand how to finance an electric car, you should note that this is how the lender makes their money. Interest is added to your monthly repayment amount each money, based upon the total loan amount left to pay off. The longer your loan term, the more interest you will pay.
Sales tax is never included in the advertised price of the car but will also need to be paid. Paying this upfront will save you in the long run, but only if you’ve planned for it and can afford to do so. There are a few different kinds of sales tax, and they can differ depending on which province you’re in. It’s best to speak to your local dealership about these costs before purchasing.
Last but not least are the additional fees. Fee can be incurred for vehicle registration and inspection, as well as administration and drawing up of your contract agreement.
Speak to the vehicle dealer and your lender about any additional fees you might be liable for when planning.
Picking an electric car for your next vehicle would favour both you and the environment. You’ll be doing your bit to save the planet while saving money at the same time. Add the fact that you’ll likely receive a rebate on your purchase worth at least a couple of thousand dollars. Given these benefits, who wouldn’t want to buy an electric car? And, as you can see, arranging finance for your new ZEV should be a breeze. Simply follow our suggestion and take the time to plan your finances responsibly. You’ll be zipping around town in your new wheels sooner than you can say ‘zero emissions’.
How to finance an electric car3 minutes
Electric vehicles are run by electric power, they are cost efficient as running costs such as car parts are low. They are good for the environment as they use little to no petrol or diesel.
Electric vehicles have less impact on the environment and owning one means you contribute to restoring the environment and climate. Not only that, electric vehicles cost less to run than petrol and diesel vehicles.
There are battery-powered ZEVs, and there are hydrogen fuel cell-powered electric vehicles (FCEVs). Look into these two and see which one is more suitable for you.
You can apply for electric car finance through banks, trade union, or vehicle dealership. Banks and trade unions will most likely offer you a more decent term than dealers. However, if your credit score is less than 600, you have the option of going to a dealership as you would be considered as a high-risk borrower.
You will need your credit report and statement of income so that they can see whether you are suitable for it. These documents will prove your eligibility and see your risk profile for the loan as well.