Before you go shopping for a used car, it is crucial to contemplate how you’re going to pay for it. Many buyers prefer getting a used car loan and while you’re out in the market trying to look for one, think about how much money you’d be saving as compared to buying a brand-new one. Still, financing a used car tends to be more expensive and a tad bit confusing. But with a little patience, preparation and persistence, you can get great deals on an auto loan for the vehicle you have your eyes on. Read on for some useful tips!
Used car financing tips
Tip #1. Prepare yourself well
You must know your credit score, which is a snapshot of your credit history. Your credit history will help decide whether most lenders would extend your financing or not. If you already have a good idea about your credit history, where to find financing and how to apply for a car loan, you will already be ahead of the dealer or private party that you approach.
Tip #2. Financing
Lucky for you, there are a lot of places where you can pre-qualify for financing outside of an auto dealer. Many financial institutions have special programs for 1st-time buyers or even with consumers who have bad credit. Large banks like Bank of America, Wells Fargo, etc. tend to have higher interest rates and fees than other lenders, though they occasionally offer specials with lower interest rates. Apply for car credit here. But if you have a bad credit score then these places might not lend to you. If you have challenged credit, a small or midsize credit union may be a good option for you. Similarly community banks are flexible with a not so good credit score as well, whereas many online banks such as Ally Bank that operate entirely on the Internet tend to offer a streamlined loan application and approval process that you can complete without leaving your house, along with a higher level of affordability when it comes to interest rates. Car financing can be easy if you trade in your current car for a newer upgrade.
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Tip #3. Understanding the cost
Used car financing typically comes with higher interest rates and shorter loan terms than you find on new car loans, although there are frequent restrictions on the age and value of the vehicles that are financed. This is because of the risk of the loan. Lenders have found that there is a slightly higher risk when they lend money on used cars because the additional chance of not being repaid is priced into the loans itself, making the interest rates higher.
Tip #4. Comparing the offers
While deciding whether an offer is good or not, try not to focus on the monthly payment of the loan offer, which can be tempting. Selecting a car, or it’s financing, on a monthly payment alone is the worst method to buy a car. Most borrowers should seek a simple fixed-rate loan, even though some lenders offer a variable-rate on auto loans. You want to compare the total cost of the car, including the total of all payments due during the loan, plus the amount you have to pay upfront, including any fee, instead of just looking at monthly payments.
Use the used-car loan calculator on our website to figure out your monthly payment. With over 800 vehicles in our inventory, Car Factory helps you choose the car of your dreams- brand-new or pre-owned! Schedule your test drive in our Miami or Hollywood locations online today at CarFactory.
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