Used cars are harder to get a loan for than new ones. Lenders are less likely to give money for cars with unknown histories. But you can get a good rate on an auto loan if you get your money together before you go car shopping. Rates can also go down if you make a down payment of 10% or more and buy your car from a dealer.
Get a loan first, then shop for a car.
There are many good things about pre-approved auto loans. Before you sign a contract, you should first find out how much you can borrow. You can also change the terms of the loan to find a good monthly payment. And sellers are eager to close a deal with a buyer who has a good way to pay for the property.
Used car loans usually have a rate that is.6 or more points higher than new car loans. But rates vary a lot from one lending company to the next, so it pays to look around. You don't have to sign with the first lender you find if you get your loan processed before you buy a car. Low rates will also save you money.
Plan on putting down 10%.
Most used car loans need a down payment of 10%. It shows the lender that you are willing to put money into this purchase and pay for it. Rates can go down and low credit scores can be made up for with a bigger down payment.
A short-term loan is another way to save money. Since a used car probably won't last as long as a new one, it makes the most financial sense to get a loan for five or three years. You save money on interest and can start putting money away for your next car.
When You Shop With A Dealer
Even for used cars, some lenders offer better rates if you buy from a car dealer. When you apply for this kind of car loan, you should think about all of your options.
Used cars sold by dealerships usually come with a limited warranty, but they also cost more. You might find a great deal in the classifieds, but there is always a risk when you buy something from a stranger. But the interest rates on these two types of loans are more than 1% different.
