What Everyone Should Know About Used-vehicle Financing
For most Americans, buying a car requires financing. There are many financing options and just as many, if not more, lenders. Don’t get overwhelmed. Most used-vehicle financing abides by the same basic rules.
1. The Financing Rates for Used Cars are Higher than New Cars
Used vehicle interest rates are higher than new vehicles for a few reasons, but the main reason is that used vehicles represent more risk to the lender. Used vehicles are more likely to suffer a major mechanical failure that could render them worthless (like an engine or transmission failure).
2. Financing for a Used Car is More Difficult to Get
Oftentimes, it is much easier to get financing for a new vehicle than for a used one. Chevy, Ford, and Toyota manufacturers boost their sales by offering great financing options to their customers. Rebates and low-interest rates are two such options that are not offered with used-vehicle financing.
3. Financing for Used Cars has More Restrictions
Usually, you cannot obtain financing from banks on used vehicles more than eight years old or that have more than 100,000 miles. The reason for this is that old vehicles with such high mileage represent are more likely to have a major mechanical failure and, thus, are riskier for the lender. It is much more difficult to recover older vehicles when stolen because they are more likely to be broken down for the parts.
4. Credit Unions Are Great Used Car Loans
If you are thinking about buying a used car, it is a good idea to join your local credit union. Local credit unions usually offer the best used-car financing. Their interest rates are competitive. If your credit is bad, credit unions are more likely to give you financing.
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.
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