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Used Car Loan Interest Rates & Lengths
Used cars are a great buy for many people. They cost less and you don't have to deal with the car depreciating when you drive it off the lot. Used car loans are another story. They generally come at a much higher interest rate than new car loans do.
Why?
Used car loans are generally for a much shorter period of time than a new car loan and you generally borrow less. In order for the lender to make it worth their time to lend you money, they will charge a higher interest rate.
Just because a used car loan has a higher interest rate doesn't mean you don't want to shop around. Interest rates for used car loans vary depending on a number of things including:
The length of your loan. Interest rates will vary greatly here and can vary by as much as two percentage points within any one lending organization
Your down payment
How much of a loan you need
The lender's typical rates
Your credit score
Additionally, many used car loans come with fees, like application fees and filing fees. These fees can be as small as a couple of dollars to as much as a few hundred. They can also come with a credit if you enable them to automatically deduct your monthly payment from your bank account.
Just like new car loans, do a bit of research before you go out shopping for your car. Determine your budget for your car using a loan calculator and an estimated interest rate. Don't forget to include your down payment.
Once you know about what you can afford, you can then go about researching your options. Quite frequently your local bank or credit union will offer the best used car loan rates. If you have bad credit, there are a number of options available now, take your time and read the fine print. Bad credit loans can come with extremely high fees and interest rates. Just because your monthly payment is low, doesn't mean you're paying a good rate. If you're paying $100 a month for 60 months, that's a lot more than paying $150 a month for 36 month. In general, dealerships generally offer the worst financing options simply because they are the go-between between you and the bank, which often results in a higher interest rate to cover their costs.
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