Used Car Financing Basics And Tips
Jason Lancaster
If you are one of the many Americans that need financing when buying a used vehicle, there are a few basic things you should know. There are many lenders and financing options available, making financing very confusing. It will help every consumer to know the basics of most all used-vehicle financing.
1. Used Car Financing Rates Are Higher
The interest rates for used cars are higher than for new cars. Although there are a number of reasons for this, the primary reason is used vehicles are riskier to the lender. They are riskier because used vehicles are more likely than new vehicles to have significant mechanical failure. For example, engine failure or the malfunction of the transmission is more likely to occur in a used car, resulting in a completely worthless car.
2. It is Easier to Get Financing for a New Vehicle
Another fact to consider is that it is more difficult to get financing for a used car than for a new car. The manufacturers of new cars such as Ford, Chevy, and Toyota want to sell their cars. In order to increase their sales, they give special financing to customers to enable them to afford to buy. For example, car manufacturers offer special, low interest rates, as well as rebates. Used cars do not have special financing options such as these.
3. Used Car Financing Is More Restrictive
Typically, most banks will not lend money on any used vehicle that has more than 100k miles or is more than 8 years old. These high mileage old vehicles represent much more risk for the lender because they're more likely to suffer a major breakdown. Older vehicles are also more likely to be stolen and "chopped up", making recovery impossible.
4. Credit Unions are often the Best Choice for Financing Used Car Loans
Local credit unions typically offer the best financing on used vehicles. Join the local credit union if you are considering purchasing a used vehicle. They probably offer the best interest rates. Credit unions may offer financing to those with bad credit when other lenders may not.
5. Leasing A Used Car Is Usually A Bad Idea
In my entire automotive career, I have never seen a used car lease that made financial sense. Typically, used car leases are structured just like new car leases, but they often have more fees. Used vehicle leases aren't usually much less expensive than a new vehicle lease, so they don't really make sense in the first place. Finally, most used vehicle leases don't protect a customer the way a new vehicle lease does, so I don't recommend a used car lease to anyone.
Author Jason Lancaster, a car industry veteran, developed AccurateAutoAdvice.com. You'll find accurate advice on http://accurateautoadvice.com/used/how-to-buy/used-car-financing-basics-and-tips/) used car finance basics and http://accurateautoadvice.com/used/how-to-buy/used-car-financing-basics-and-tips/) used car finances.
|
