Have you ever noticed that auto loan rates seem to be lower for older drivers? If you’re a younger driver, it may seem that you just can’t catch a break at all! But there are a few reasons why older drivers can acquire lower auto loan rates. Let’s take a look at what they are.
Older People Take Out Shorter-Term Loans
One reason that older drivers tend to get lower auto loan rates is because they often take out shorter-term loans. Many younger drivers automatically opt for the 60-month, 72-month, or even 84-month loan plans when financing their automobiles because they are trying to stretch out the total sum of the vehicle and lower their monthly payments. However, the longer the loan term, the higher the rate.
Older drivers, on the other hand, often take on shorter loans because they have a more stabilized fixed income, and they’re not trying to spend a lot of years paying off a loan if they’re not sure that they will outlive it.
As a result, they often acquire a lower rate for their loan.
But that’s not the only reason auto loan rates are often lower for older people.
Older People Have Lower Credit Scores Than Younger Drivers
Older drivers have had years to make their financial mistakes and straighten them out – before there was a credit system set in stone. At this point, their wild spending is out the door, they’ve cleared up their debt, and usually have several credit cards, a home loan they’ve paid off and other items to help build a strong credit history. This helps to build their credit scores rather than detract from them and helps creditors to assess risk more effectively. As a result, their credit scores are lower on average. And of course, a lower credit score equals a lower car loan rate.
If you’re a younger driver, it may not seem fair that you may run into a higher rate simply because of your age. But if you begin to make wise decisions regarding your loan term and credit now, you could benefit from the same lower car loan rates as you get older.