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Used Car Loans
The average used car loan will usually entail higher rates and shorter repayment periods. This is mainly due to the fact that the lifetime of a used car is not as guaranteed as that of a new one, and therefore, from the standpoint of the lender, a borrower’s willingness to repay the loan can literally live and die with car. That being the case, it’s important that as a buyer of a used car you are extra aware, so that you are getting the best deal possible on a car that is reasonably priced and has been well maintained, so that you only have to take out that used car loan which is going to be the most feasible to repay.
First foremost, be aware of all the factors that go into financing a car. If you choose to finance a car purchase, you are in fact agreeing to pay more than the cost of the car itself, after figuring in interest rates and annual percentage rates (APR). With a used car this presents a particular dilemma: there can be a very thin line between when it is feasible to buy a used car, and when it becomes just as feasible to purchase a new one. If you are going to take out a used car loan, make sure that the interest rates and APR are as low as can be, so that the overall cost of your used car is still a bargain when compared to the cost of a new one.
Many car dealers try to distinguish their used cars from those of independent sellers buying dressing them up with terms like “certified” or “guaranteed.” Don’t be fooled. When buying a used car from a dealership, you need to do just as much homework as you would buying from an independent seller. Thanks to the Federal Trade Commission’s Used Car Rule, dealers must post a “Buyer’s Guide” in every used car they sell, detailing such information as whether or not the vehicle is being sold with a warranty; what percentage of any repair costs a dealership will cover; accident and/or repair history; the current condition of all major mechanical and electrical systems on the car; and a list of recommended actions, such as getting the car inspected by an independent mechanic prior to purchasing. Remember, when buying a used car it’s not just about price: the condition of the car is just as important. You don’t want to end up paying off a used car loan over the course of several years for a vehicle that’s not going to even last that long. A Buyers Guide can help you ensure that the price a dealer is asking for a used car is reasonable, in line with condition of the vehicle, and therefore, worth the added costs of a loan.
When buying a used car always come to the table with a strict limit on how much you want to spend. If you’re planning to finance your used car purchase, that limit should reflect the amount you are willing to spend on the overall cost of the used car loan, as well as the monthly payments. If buying from a used car dealer, don’t just really on the dealership for financing options, instead research third party lenders first, (as you would in order to buy from an independent seller,) and bring that information with you to the dealership. Car salesmen get paid off commission, so they will always steer you towards the financing option that is most beneficial to them, usually at increased cost to you. By having a third party lender in the wings, you’ll have a chip to bargain with dealers for loans with lower rates—or at the very least, you’ll already have a financing option that you know fits within your budget.
Bottom line: securing a used car loan is much like securing a new car loan, only with more factors to consider. Be take extra time and do careful research, so hat when you drive away with your used car you know that you aren’t paying a single cent more than you should, or are able, to pay.
Topics: Auto Loans |
