The Basics Of Used Car 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 Interest Rates are Higher on Used Vehicles
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's Harder To Get Financing For A Used Car Than A New Car
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. There are More Restrictions with Used-Vehicle Financing
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. For Best Used-Vehicle Financing, Join the Local Credit Union.
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. It is Not a Good Idea to Lease a Used Vehicle
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.
Article Source: http://www.search-raven.com
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