New vs Used Car Interest Rates
If you’re looking to finance your next car, you’re probably wondering about interest rates and how they can affect your monthly payments.
These rates can play a big part in your monthly finance payments. However, the interest rates for a new and a used car may not be the same. So, what’s the difference and which option is better for your budget? Read on to find out.
A Closer Look at Interest Rates
Before we dive into the details of new and used car interest, you’ll want to dig a little deeper and get a better understanding of what interest rates are and what they can mean for your financing plan.
Interest, or annual percentage rate (APR), is an additional charge the lender applies to your loan for using their assets. It is usually based on the principal of your daily balance, or how much you owe, and is included in each monthly statement.
When you make a loan payment, a portion of it will pay off the interest that was accrued that month. Typically, the higher your APR, the more interest you’ll need to pay. However, since the interest owed for each month is mainly based on the daily principal balance, it may continue to decrease as you pay off more of your principal.
New & Used Car Average Interest Rates
APR can differ depending on the type of vehicle you choose to finance. If you’re thinking of driving home in a pre-owned vehicle, the average interest rate for a used car is around 6%. If you’re considering a new vehicle, new cars have an average rate of 5%.
Generally, the interest for a used vehicle may be higher than that of a new vehicle. However, other factors can affect your APR. For example, your credit can play a significant part when applying for a loan. The better your credit, the lower your APR may be.
Other interest rate factors can include your down payment amount and the length of your loan.
How to Get the Best Interest Rate for Your Budget
Financing a used car may mean higher interest rates compared to buying a new vehicle, but it is possible to drive home in a great pre-owned vehicle with the best rates for your budget.
To help you get the ideal used car interest rate for your budget, here are a few tips you should keep in mind.
- Improve Your Credit Score. While it is possible to get good financing with bad credit, the wisest financial decision for anyone with a less-than-perfect score is to improve it. Not only will this increase your chances of getting the financing terms you need, but it’ll also set you up for success when you’re ready to upgrade or buy your next used car.
- Increase Your Down Payment. A down payment can make it easier to reduce interest rates and your overall monthly payments. Generally, drivers should put down at least 10% of the used car’s value. However, increasing the down payment can make it even easier to get the best rates for your budget.
- Apply for Shorter Used Car Loan. The length of your financing plan can also play a role in your interest rates. Having a longer term can mean lower monthly payments, but it can also result in higher interest rates. For a lower APR, it’s best to get a shorter-term loan.
Finance a Cheap Used Car at Val-U-Line®
The average interest rate for a used car may be higher than a used car but understanding the information above and working with a team of experienced experts can help you get the best used car interest rates for your budget.
To learn more about how we can help you secure the right interest rates and used car financing options, contact the finance experts at Val-U-Line® today!