The Basics Of Used Car Financing | Cars and Trucks

By JasonLancaster
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If you are one of the many Americans that need financing when buying a used vehicle, there are a few basic things you should know. There are many lenders and financing options available, making financing very confusing. It will help every consumer to know the basics of most all used-vehicle financing.

1. The Financing Rates for Used Cars are Higher than New Cars

Used vehicle interest rates are higher than new vehicles for a few reasons, but the main reason is that used vehicles represent more risk to the lender. Used vehicles are more likely to suffer a major mechanical failure that could render them worthless (like an engine or transmission failure).

2. It's Harder To Get Financing For A Used Car Than A New Car

It's much harder to get used car financing than it is to get new car financing, and the reason is really simple. New car manufacturers (like Toyota, Ford, Chevy, etc.) want to sell cars, so they'll provide special financing to people to help them be able to buy. New vehicles also usually have rebates and/or special interest rates - used cars don't.

3. Used Car Financing Is More Restrictive

Most of the time, banks will not finance used vehicles with more than 100,000 miles or that are more than 8 years old. High mileage translates to mechanical failure and expensive repairs. This is too risky for the lender. When stolen, older vehicles are likely to be taken apart and sold, making it much more difficult to recover them.

4. Credit Unions are often the Best Choice for Financing Used Car Loans

If you are thinking about buying a used car, it is a good idea to join your local credit union. Local credit unions usually offer the best used-car financing. Their interest rates are competitive. If your credit is bad, credit unions are more likely to give you financing.

5. Most of the Time, it is a Bad Idea to Lease a Used Car

Almost always, it is a bad idea to lease a used car. Although the lease on a used car is structured like the lease on a new car, they usually have more fees. In addition, the lease on a new car isn't that much more expensive than the lease on a used car. How does that make sense? Furthermore, customers don't get the same protection on used car leases that they do for new cars. Leasing a used car is just a bad idea.

About the Author

Author Jason Lancaster, a car industry veteran, developed AccurateAutoAdvice.com. You'll find accurate advice on used car finance and basic finance of used cars.

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