Can’t decide between a new or used car? Looking at the financing for both could help sway your decision. Let us help break it down for you.
New Auto Loan
Generally speaking – It’s much easier to get a new auto loan than a used auto loan from a lender. A lender looks at the value of the auto purchase because that vehicle is held as collateral. An older auto with less value equals less collateral for the financial institution that gives the loan. When a financial institution loans money for a new car, they know they have a new and valuable vehicle if the loan goes into default due to non-payment from the borrower.
Used Auto Loan
With used auto loans, the financial institution or dealership may charge higher interest rates than they would for a new auto loan. As a result, the higher rate may make the vehicle cost more in the long run because of expenses related to the interest. A new auto, however, depreciates once mileage accumulates on the vehicle. Usually, the most massive depreciation happens in the first two years of owning it.
Exceptions to the Rule
There are financial institutions where this is not the case. For example, at Directions Credit Union, our auto loan rates are based on your credit qualifications, not on the vehicle. That means new or used, short terms or long terms, you get the best deal in town for the car you want.
Getting your loan at the dealership
Whether you decide to go with a new or used auto loan, don’t assume the dealer will have the best interest rate. Sometimes, dealership rates are even higher than the rates offered by financial institutions or online options.
Become an empowered buyer who knows your financial plans and options before walking through the dealer’s doors.
- Research and compare interest rates to find the best loan rate.
- Look online.
- Call different dealers and financial institutions.
By having your financing plans in place before you go to the dealership, you will have more bargaining power to negotiate the best possible interest rate.