Buying a used car can be a costly investment, but buying a new one is even more expensive. Since the economy has been going up and down recently, it seems like more people are looking for the best deal on a used car.
A car can cost as much as or more than $21,000. Even when things aren't so bad, this is a lot of money. Can you pay that much right now? Comerica Bank in Detroit made the Auto Affordability Index. It said that in the third quarter of 2003, the average family needed almost 20 weeks of income before taxes to buy a car. That's about five months' worth of pay for a car. Is that worth it in this economy?
Considering all of this, it's easy to see why so many people are now thinking about buying a used car. In this market, there are more and more ways to get a loan for a used car. Every year, millions of cars get taken off lease, so there are a lot of four- to two-year-old cars to choose from when you're looking for a used car.
Lenders pay for the car with the Used Car Loan Value.
No matter if the car is new or used, it is still an investment. But most lenders will finance a used car based on the value of the loan, not the car itself. This is usually less than what the car really costs. If you subtract the loan value from the price of the car, you can figure out how much of a down payment you would need.
Know the value of your used car loan before you go shopping.
If you know how much a car is worth as a loan, you can figure out how much you need to pay off your car loans. If a dealer sells you a car for $5,000, the loan value is about $4,000. You would have to talk with the dealers about the $1,000 down payment. This math also helps you stick to your budget. You can figure out how much the down payment will be for each car you look at, so you won't go over your budget. You have a little more of a safety net if the loan amount is less than the cost of the car.
So, knowing the car's used car loan value before you negotiate will help you get a better deal, and you won't be caught off guard by the amount of the down payment.
The more prepared you are when you go to buy a used car, the more likely it is that you will be able to negotiate the price you want to pay. To get ready, you can find out how much your used car loan is worth.
