Breaking Down Used Car Financing
Purchasing a used car is usually much cheaper than buying a new one. However, those savings can quickly evaporate if you need to finance your purchase. Interest rates for used vehicles can sometimes be twice what you would pay to finance a brand-new car, which could mean a loss of a few thousand dollars. In more extreme cases, a poorly financed used vehicle can sometimes be as expensive as buying a new one. For these reasons, it’s essential that you carefully consider if and how you will finance your used car.
The following seven considerations will help you get the best price when considering used car loans.
Six Considerations When Financing a Used Car
1. Review Your Credit Score
Whether you are buying new or used, the best interest rates generally go to those with the best credit. The average interest rate for a used car loan is 5.53 percent for someone with the highest credit score and 16.85 percent for someone with the lowest rating. Throughout a traditional loan, the difference between those two ratings could be thousands of dollars.
Checking your credit score regularly is a good way to identify areas for improvement. We recommend using free credit-reporting services like Credit Karma or Experian.
Learn More: Nissan of Lithia Springs Credit Assistance Program
2. Get Preapproved
Getting pre-approved before any car purchase is generally a good idea, especially when going through a private seller. Getting pre-approved also gives you a baseline from which to compare rates, which can help you find the best one. Online vendors such as Carvana often offer preapproval; however, you may get the best rates from your own bank or credit union.
Get pre-qualified with Capital One with no impact on your credit!
3. Stay Away From Long-Term Used-Car Loans
While longer-term loans may keep the payments lower, you’ll pay more interest over time and probably a higher rate. We recommend finding the shortest loan term you can afford, which will mean minimized interest payments and a lower chance you owe more on the loan than the car is worth.
4. Place a Large Downpayment
While we don’t suggest breaking the bank just to put down a larger down payment, try to put down as much as you can reasonably afford. The more you pay upfront, the less money you’ll lose to interest payments. Generally, if you compare how much interest your money would make in a savings account, it’s most likely less than what you would save with a larger downpayment on your car loan.
Check out our auto payment calculator here!
5. Check the Vehicle History
Ideally, you don’t want to put yourself in a situation where you are paying off your loan on a car with significant issues or a plummeting resale value. Some vehicle history reports can miss flood, collision, or other damages, so checking multiple reports for a car you are seriously considering is best practice. At Nissan of Lithia Springs, we offer free CarFax reports on all of our pre-owned vehicles.
6. Factor in Repair Costs
While you will be saving money purchasing an older model car, keep in mind that some repair costs might be necessary down the road. Don’t forget the inevitable cost of replacement tires, brake pads, and unexpected repairs. While all of the pre-owned vehicles on our lot are thoroughly inspected by our mechanics for any potential issues, some may still arise over time for an older vehicle, so it is important to have some money set aside for a rainy day.
Find Your Next Vehicle at Nissan of Lithia Springs
At Nissan of Lithia Springs, we want to get you into the right vehicle. Whether it’s new, used, or leased, we ensure that you drive off the lot satisfied with your decision. If you’re in the market for a used vehicle and plan to finance it, view our inventory below. We look forward to helping you hit the road in a quality Nissan vehicle!