Financing is where car buying gets murky for most people — not because it’s all that complicated, but because it’s usually explained in shorthand at the end of a long day. Let me slow it down. This is how it works when you finance a vehicle through a dealership in British Columbia, including ours.
How approval works
When you apply, the dealership sends your application to lenders — banks and finance companies — who each decide whether to approve you, how much, and at what rate. You might get several approvals with different terms. The dealership should be able to tell you which lender approved you and show you the actual terms: rate, term length, and total cost of borrowing. Those specifics are yours to know before you sign, not after.
What affects your interest rate
Lenders are pricing risk. The main things they look at:
Your credit history. A record of paying bills and loans on time is the single biggest factor in getting the best rates. A thin file or a bruised one doesn’t mean “no” — it usually means a higher rate or a smaller approval. Plenty of people rebuild from there; a car loan paid on time is one of the better tools for it.
Income and stability. Lenders want to see that the payment fits your income alongside your other obligations. Bring honest numbers — an approval built on overstated income helps nobody.
The vehicle itself. Age and mileage matter. Lenders generally offer better rates and longer terms on newer vehicles; an older, high-kilometre vehicle may get a shorter term or a higher rate, because the loan needs to make sense against the vehicle’s remaining life.
Your down payment and trade. Money down (or equity in a trade) shrinks the loan relative to the vehicle’s value, which lenders like. It also directly lowers your payment.
The term you choose. Longer terms lower the monthly payment but increase the total interest you’ll pay and raise the risk of owing more than the vehicle is worth partway through. Shorter terms cost more per month and less overall. Neither is “wrong” — but choose with both numbers in front of you.
One thing worth knowing: manufacturer promotional rates apply to new vehicles on approved credit, and they can be much lower than standard bank rates. Used vehicles are financed at the lender’s regular rates for that vehicle’s age — still competitive for strong credit, just set by the lender rather than subsidized by the manufacturer.
The taxes and fees, without the fog
On a vehicle bought from a BC dealer, you pay 5% GST and 7% PST — 12% total — on the purchase price after your trade-in allowance is deducted. That last part matters: if you trade in a vehicle, you only pay tax on the difference. Sell your old vehicle privately instead, and you pay tax on the full price of the new one.
Beyond taxes, dealerships charge fees. Ours includes a $699 administration fee. Whatever dealer you buy from, the fees should be itemized on your bill of sale, and in BC a dealer’s advertised price must already include all fees — only the taxes sit on top. If a worksheet shows you a fee you’ve never heard of, ask what it is. “What is this for?” is always a fair question, and you should get a straight answer.
What your payment actually is
A monthly payment is just the amount financed — price, plus taxes, plus any products you chose, minus your down payment and trade — divided over the term, with interest. That’s all it is, which means every lever is visible: price, down payment, trade value, term, and rate. If a payment seems too high or suspiciously low, one of those five is doing it, and you can ask to see each one.
Before you sign, check these
The lender’s name, the rate, and the term — in writing.
The total cost of borrowing over the full term, not just the monthly figure.
That the vehicle, VIN, and price on the contract match what you agreed to.
Any optional products listed — confirm you actually chose each one.
Whether there are penalties for paying the loan off early. Most standard auto loans in Canada are open, meaning you can pay extra or pay off early without penalty — but confirm it for yours rather than assuming it.
If you’d like to know where you stand before you shop, you can get pre-approved — it gives you a real approval to plan around instead of a guess. No pressure either way: I’m at Valley Mitsubishi in Kelowna, Monday to Saturday, 10 AM to 5 PM, and I’m glad to walk through the numbers on anything you’re considering. Call me at (778) 363-1453.
— Jayson Gazloff, Sales Consultant, Valley Mitsubishi
