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Used car loans for cars older than 10 years aren’t as easy to finance as new cars. Lenders are more hesitant to finance vehicles with unknown pasts. However, you can find reasonable auto loan rates by lining up you’re financing before you go shopping. A down payment of 10% or more, in addition to buying from a car dealer can also improve your rates.
Get financing first, then auto shop
Pre-approved auto loans have a number of advantages. First, find out what qualifies you to borrow before getting caught in a contract. You can also play around with the loan terms to find a reasonable monthly payment. And sellers are eager to close a deal with a buyer who has secure financing.
Used car loans often require a slightly higher rate, usually 0.6 or more, than new car loans. However, the rates vary widely among loan companies, so it’s worth taking a look. Processing your loan before purchasing your car frees you from the pressure of signing up with the first lender you find. It also saves you money at lower rates.
Plan 10% in advance
The 10% is most often required for a used car loan. It tells the lender that you are investing in this purchase and are willing to make payments. A higher down payment can improve rates and offset low credit scores.
Another way to save lots of money is to settle on a short-term loan. Since a used car probably won’t last as long as a new car, five-year and three-year loans make the most financial sense. You save on interest costs and may start saving for your next car.
Buy from a dealer
Some lenders also offer better rates when shopping through an auto dealer, even with used cars. You must weigh all your options when applying for this type of car loan. Dealers generally offer a partial warranty on their used cars; they also charge more. You may be able to find a great deal on 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%.
