Used car tips to help you save when financing.
Buying a used car can be a great way to save money and stick to your budget. A used or preowned car can be much less expensive than buying a similar new model. The average used car price as of January 2023 was about $26,000. On the other hand, the average price of a new car was around in March 2023.
However, if you don’t have the cash to purchase your used car, you will need financing. Lenders typically charge higher interest rates on used car loans. Here are used car tips to consider if you are planning on financing a used car.
Why are used car loan interest rates higher?
The tend to be higher than those charged for new cars. That’s because there’s more uncertainty about the value of a used car, and lenders find that used car borrowers default more frequently on their car loans regardless of their credit score. That means that even if you have good credit, the interest rate on your used car loan could be higher than the rate you would earn for a new car.
What can I do?
When shopping around for a used car, consider the cost of your loan with interest to determine if you’re getting a good deal and if it still makes sense to purchase a preowned vehicle. You can get preapproved for a loan from your bank or credit union to avoid hard inquiries from the dealership.
Shop around for the best auto loan rates. Comparison shopping can help you save overall. If you’re purchasing a low-cost vehicle or buying from a person directly instead of a dealership, you might consider a personal loan instead of an auto loan. You can compare the rates to see which is more cost-effective.
Summary
Buying a used car over a new one can save you money and help you stick to your budget. If you are planning to finance the vehicle, be sure to calculate interest into the price of the car to confirm the purchase makes sense. Compare lenders to secure the best auto loan or consider a personal loan if the vehicle price is low enough and you can get a better rate.
If you need quick funding, you can get started online at Uprova.com for free and without impacting your FICO credit score.