Given the current economic crisis, more people are opting for used cars and trucks as opposed to new ones. For sure, a used car can be bought and insured for a whole lot less than an equivalent, brand-new model.
But there is, however, one disadvantage: used car loans cost typically more than a car loan for a new car. How come? Because the rates of interest are higher. The good thing is this: we can help you find low interest rate used auto loans through our network of loan creditors, finance companies, and used car dealerships in your area. When you apply online, our Advanced Credit Matching System (ACM), matches you to the idea lender in your area, taking into account a multitude of factors such as:
- Your Credit Score
- Your Budget and Down Payment
- The Amount You Want to Borrow
You will want to determine whether you want a 36, 48, 60, or 72 month used car loan. The longer the term length of your loan, the smaller your payments. However, you will pay more in interest over the long run.
Used Car Loan Rates
As you probably know, auto loans rates for used cars vary by region and credit score. That said, we can offer a few nationwide approximations for a 4-year used auto loan.
- Super-Prime Credit: 6-8% APR
- Prime Credit: 10-15% APR
- Sub-Prime: 20% APR or higher
Financing a Used Car: Advantages
Used vehicles have a few significant advantages over new vehicles. Sure, as previously stated, the APR rates associated with used car auto loans are marginally higher than those for new vehicles. However, new vehicles are notorious for their depreciation. It’s an old rule of thumb that a new car or truck will lose 9-11% of its value the moment you buy it, and 20% over the first year of ownership. That means negative equity (owing more than your asset is worth) is a very serious threat. Also known as being “upside down” or “underwater,” it makes it nearly impossible to trade in or sell your vehicle without having a lot of money still owed to your lender.
Used vehicles are not immune to depreciation; however, they have already undergone that initial phase. Additionally, auto loans for used cars are less likely to break the bank. For starters, a used car costs significantly less than a comparable version that’s fresh off the lot. Also, it may be easier to get approved for such a loan – this is especially true if you’ve got credit issues of any kind (and who doesn’t).
It is always best to provide a down payment, if possible. This will reduce the amount financed, which means less money spent on financing. Additionally, it lowers the risk of negative equity and makes your application much more attractive to prospective used car lenders.