Used Car Auto Loan - Tips On Financing Your Used Car

New cars are easier to finance than used cars

New cars are easier to finance than used cars. Lenders are more hesitant of financing vehicles with unknown pasts. However, you can find reasonable rates on auto loans by lining up your financing before you go car shopping. But with a down payment of at least 10% and shopping with a car dealer, your rates can be improved.

Get Financing First, Then Car Shop

Auto loans that are preapproved have many advantages. Before you get stuck in a contract find out first what you are qualified to borrow. You can also play around with loan terms to find a reasonable monthly payment. And sellers are eager to close a deal with a buyer that has secure financing.

When it comes to used cars, slightly higher rates (usually .6) are required than new car loans. But between lending companies rates can vary so it's important to shop around. To relieve yourself from the pressure of signing with the first lender you find, you need to process your loan before a car purchase. It also saves you money in lower rates.

Plan On 10% Down

Usually, 10% is required for a used car loan. It signals to the lender that you are investing in this purchase and are willing to make payments. A larger down payment can improve rates and offset low credit scores.

Another way to save money is to choose a short term loan. Because a used car probably won't last longer than a new one, it's sensible to make 5 and 3 year loans. You save on interest costs and can start saving for your next car.

Shopping With A Dealer

When you purchase through a car dealership, there are lenders who will offer better rates. You should weigh all your options when applying for this type of car loan.

For used cars, dealerships can sometimes provide a partial warranty. Remember that although you can find great deals in the classifieds, there's risk with that purchase. But in these types of loans, the difference in interest rates is more than 1%.

by: Beth Woodard.

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