Used Car Loan

Obtaining financing for a used car is different than obtaining a loan for a new car. As the name suggests, used car loan rates are designed especially for pre-owned vehicles. For a used car purchase, they are much more practical than any other type of cash loan.

Interest Rate Considerations

Used car loan interest rates have the potential to be higher than new car interest rates. This isn't a conspiracy to force consumers to buy new vehicles; it is because lenders view older cars as a higher lending risk. For example, a car that is 10 years old is statistically more likely to experience problems than a car just driven out of the showroom.

Lenders must always consider the grim fact that they may have to repossess the car, especially if the buyer is unable to make the agreed loan payments. Since the lender thinks from an "if" perspective, they must find a way to earn more for a used vehicle to absorb the cost of taking a lending risk. Their only available solution is a higher interest rate.

Credit History and Income

The auto loan rates reflected in financing options are also dependent upon the loan applicant's credit history and income. Prospective lenders analyze both factors, carefully deciding how much money to lend and a fair interest rate to offer. Lower credit scores result in a higher interest rate; a good score will usually yield a fair rate for a used vehicle. Financing may also include a shorter loan term than a new car loan; in comparison, the total interest paid on a used vehicle may not be much more than a new car loan's total interest in the end.

Shopping for a Used Car

Another very important thing to know about used car financing is that the best lenders are not those endorsed by the dealers. This is the first and most common mistake consumers inadvertently make during the process of shopping for a used car loan. Auto dealers offer several different loans from multiple companies they have special arrangements with.

In most cases, the lenders they associate with offer the dealer a bonus or incentive for generating new financing contracts. This is why dealers push consumers to use the lenders they endorse. Always be aware that the terms offered may not be the best. Always research prospective lenders independently before visiting a dealership.

We understand that finding the best auto loan rate is important - and finding a lender apart from the dealership is crucial. There is no loan that is universally best for everyone. Depending on individual circumstances, different loans will be "best" for different people. We also understand that finding used car financing by visiting different banks and lending offices is time-consuming and stressful. To eliminate stress and hassles, we offer the convenience of shopping for auto loans online. Simply use the free form at the top of the page to find a list of reliable prospective lenders.