Why Are Used Car Loan Rates Higher?
If you're looking to save on a dependable vehicle, you may be considering buying a used car. While driving home in a pre-owned vehicle can cost less than a new car, used car loan rates do tend to be higher. However, there are ways to get the favorable financing you need for your budget.
Here's a closer look at what you need to know about used car loan rates.
Average Used Car Loan Rate
The average interest rate for a used car loan is typically around 6%, but the exact rate you could be approved for will depend on a few factors, including your credit score. Normally, the higher your credit, the lower the rates you'll be qualified for.
On top of that, used cars tend to vary in value, so finance rates can be determined by the vehicle's age and overall condition. If the used car you're considering is older and has more miles on the odometer, it could come with a higher loan rate. On the other hand, a vehicle that's newer and has less miles can lead to lower interest.
Finally, there's the down payment. Down payments are great for making your vehicle more affordable, but it can also help you get approved for lower interest rates. If you can put down about 20% of the total price of the vehicle, you may be able to lower the rate of your used car loan.
Benefits of Used Car Loans
Used car loan rates may be a little higher than new vehicles, but they do come with a few notable benefits:
- Lower Monthly Payments. Due to their age and mileage, pre-owned vehicles can typically cost less than newer cars. As a result, buying used can lead to lower monthly payments.
- Shorter Loan Terms. If you want to pay off your car faster, buying used may be able to help. Used car loans can offer shorter finance terms depending on the lender as well as the vehicle you choose.
- Better Vehicle Value Over Time. One of the major benefits of used cars is their ability to retain their value. The more the car can keep its value over time, the lower the risk of becoming upside down on your loan where you owe more than the vehicle is worth.
Used Car Loan Tips
If you're interested in financing a pre-owned vehicle, there are a few tips that can help you get a payment plan with lower rates. The easiest thing you can do is to add a down payment. Again, a down payment will help lower the interest rate for your loan, so you can find the financing you want for your budget.
Also, it's best to build up your credit score if it's a little low. Getting a used car loan is definitely possible if you have bad credit, but it's always a good idea to improve it if you can before buying to help you get the rates you need. A few simple ways to boost your credit include paying bills on time and paying the entire statement balance. You also want to make sure you're not applying for too many credit accounts within two years.
Find an Affordable Used Car Loan at Val-U-Line®
Used car loan rates may be higher than new car loan rates, but you can still get the pre-owned vehicle and the finance you need for your budget.
Looking to find the right used car and the right financing? Val-U-Line® can help! Just contact us to learn more about how we can find the right loan for your next used car.