Financing a pre-owned car is possible. It allows you to get a vehicle that is a few years old for less money than what you would get at a new-car dealership. However, when you finance a pre-owned car, it doesn’t always go in your favour. There are a few things that you probably wish you had known prior to going through the financing process.
More Lenders Will Work with You
You might be surprised that there are a number of lenders who will work with you when you buy a new car over a pre-owned car. This is because there’s more money to work with and they can deal with bad credit scores a bit easier. There are even ways to get approved for a car loan with a bad credit score.
The lenders will work with you at the dealership level or on your own. It’s easier to get pre-approved for a loan if you’re buying new, too.
If you have already financed a pre-owned car, you know that it can end up being quite the ordeal.
Interest Rates are Lower
If you’ve ever caught glimpse of what you’re paying in interest rates for a pre-owned car, it could have been less if you bought new. While you likely have a loan term that is for fewer months (36 versus 60, for example), it can still cost you quite a bit of interest.
Often, it’s a good idea to use a car loan calculator so that you can see what the cost savings are on interest rates. Even half a percent over a few years can go a long way to saving you on your monthly payments.
More Financing Options
When it comes to buying a new car, there are simply more options available to you for financing. One of the main reasons for this is because there’s more room to work with. The dealership or the manufacturer themselves may offer some financing deals that will allow them to move the inventory faster. They may offer zero percent financing for the first six months on model X and model Y. They may also have other financing deals or zero down deals during certain times of the year.
The depreciation has already happened on the pre-owned cars, so they don’t have as much money to work with. They can’t give good deals. Plus, they know that if a vehicle is already four years old, you can’t finance for six years because you would have a 10-year-old vehicle by the time you’re done financing. It’s not a good idea. They know it and you know it.
When you look at financing a pre-owned car, the lenders aren’t going to tell you the pros and cons. Those are for you to know on your own.
The most important thing to know is that you always have options. Know your credit score before you go in. Lower credit scores will immediately result in higher interest rates. Not all lenders offer the same rates and terms, so do a bit of comparison shopping. This way, the next time you finance a car, you know that you’re getting a good deal on the loan terms.