Used Car Loan Tips

used car loans

Many people don’t know that financing a used car is slightly different than financing a new car. It’s for this reason that before you go out to purchase a vehicle that isn’t brand new, you should first consider reading through some of these informative used car loan tips …

1. Used Cars Have Higher Interest Rates

Traditionally, when you finance a vehicle through a bank or dealership, you will find that the used car will come with a higher interest rate than the new car – sometimes as much as 2% higher. Why? Mainly because they’re not likely to get as much out of the used car in payments as they would the new car (new cars tend to cost more), so money has to be made in some fashion. It’s good to keep this in mind, however, so you won’t feel that you’re being cheated if you’re quoted a higher rate than you anticipated. Many credit unions offer some good rates on used car loans.

2. Many Banks Don’t Finance Cars Over 5 Years Old

It’s also good to keep in mind that many banks will not lend you money for a used car that is over 4 or 5 years old. There’s just too much risk of the vehicle having problems. Many times, you will have to finance the vehicle through a private party, or possibly your credit union.

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3. Online Banks Offer Better Rates Than Brick-and-Mortar Banks

If you’re truly in the market for a used car, one thing’s for sure, you definitely don’t want to overlook visiting online lenders for financing. Because online banks don’t have the same overhead costs as brick-and-mortar banks, they extend discount rates to you. So not only can you find cheaper used car rates through online banks than you can brick-and-mortar banks, you can also find rates that are much closer to new car loan rates. You can also use online websites like Go Banking Rates that provide free auto loan quotes to people based on their information. This will make the comparison-shopping experience even easier.

When you’re spending thousands of dollars for a vehicle, you want to make sure the process flows as smoothly as possible. So consider these tips as you search for auto loan financing. This way, you can make the most out of this often tedious process.

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About the Author

Stacey Bumpus

Stacey Bumpus holds both her Bachelor and Masters degrees in Communications. After spending years in corporate communications, she discovered freelancing was really her cup of tea and fell in love with finding and writing about the latest financial news. Now, providing news and tips about banking, mortgages, taxes (and even logging her own efforts to save for retirement), she's not only fulfilling her lifelong passion, but also helping others manage their finances responsibly.

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