Finance rates in used cars are very different than those on new cars. All factors being equal, the loan rate paid on a used car loan is going to be significantly higher than on a new car. This is because used cars depreciate faster and if you run into a spell of bad luck and default on the loan, the lender is going to have more trouble recouping what they gave you to buy the car. Typically, on a used car, the loan will initially be upside down, meaning you owe more than the car is worth.
No matter where you get the loan for the purchase of a car, whether new or used, there will be distinct differences in the requirements for the loan. It does matter to the lender, be it a credit union, a bank or a dealership, if the car is new or used, but different rules and requirements apply in each case and for each situation.
Regardless of the car that is being purchased, the loan amount the buyer is able to qualify for is the beginning point. Take this into consideration before deciding on either a new or a used car, then do the proper research online and determine which categories need exploration. The lender is going to look at the loan amount requested, the potential buyer’s income, credit and current expenses to determine if the loan desired is approvable. The main thing lending institutions are concerned with price-wise is that the car is worth at least what they are loaning for it.
With a new car, buyers are aware that the sticker price posted on the automobiles in dealership lots are negotiable, though much of that depends on how many cars are in stock, season, quotas, etc. Those looking for a new car will walk out with a factory warranty and factory condition vehicle; though it will depreciate significantly the minute it is driven off the lot. A new car loan lender may want to see a nice portion of the buyer’s own money being used as a down payment for this type of purchase.
If the car is being financed through the dealership itself, extra incentives may be offered, such as additional option choices or rebates. Maybe the interest rate charged is based on credit criteria assessments similar to the bank’s car interest loan rate. However, if financed with the dealer’s lender, then a cash rebate or lower interest rate might be offered. Loan rates on a new auto, from whatever source, are going to be fairly similar.
When considering a used car, use CarFax to make certain the vehicle hasn’t been in unreported accident. Whatever auto loan lender you use, you can be sure that the loan amount they will give is based on the values set forth in the Kelley Blue Book. Potential buyers should research the KBB Value to make sure they are getting the best deal on used cars.