Used Car Auto Loan - Tips On Financing Your Used Car
Written by: Carrie Reeder
Used cars are not as easy to finance as new cars. Lenders are
more hesitant of financing vehicles with unknown pasts. However,
you can find reasonable rates on auto loans by lining up your
financing before you go car shopping. A down payment of 10% or
more, plus shopping with a car dealer can also improve your
Get Financing First, Then Car Shop
Pre-approved auto loans have a number of advantages. First, you
find out what you qualify to borrow before you get stuck in a
contract. You can also play around with loan terms to find a
reasonable monthly payment. And sellers are eager to close a
deal with a buyer that has secure financing.
Used cars loans often require a slightly higher rate, usually .6
or more, than new car loans. However, rates vary widely between
lending companies, so it pays to shop around. Processing your
loan before your car purchase relieves you from the pressure of
signing with the first lender you find. It also saves you money
in lower rates.
Plan On 10% Down
10% is most often required for a used car loan. It signals to
the lender that you are investing in this purchase and are
willing to make payments. A larger down payment can improve
rates and offset low credit scores.
Another way to save money is to choose a short term loan. Since
a used car probably won't last as long as a new car, five and
three year loans make the most financial sense. You save on
interest costs and can start saving for your next car.
Shopping With A Dealer
Some lenders also offer better rates when you purchase through a
car dealership, even with used cars. You should weigh all your
options when applying for this type of car loan.
Dealerships usually provide a partial warranty for their used
cars; they also charge more. You may be able to find an
excellent deal in the classifieds, but there is a level of risk
with that purchase. However, the difference in interest rates
between these types of loans is more than 1%.
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