Used Auto Loans Can Buy The Most Car For Your Money
Doug Smith

Defined Tag: Used Auto Loans.

If you can't pay cash for a used car, then used auto loans are the solution. New cars are shiny and give you bragging rights for a while. However, they are more expensive than used vehicles, and may lose up to 30% of their purchase price through depreciation when first driven off the lot! If you bought a $30,000 new car, drove it for a year, and took tried to sell it to another dealer, they might just consider it to be a used car with a Blue Book Value about $21,000.

That's an extreme case, but it illustrates the value of used cars. A used car is one that someone else bought as new and drove for a while. Then the owner may trade it in or sell it as a used car. The fair market value, also called the Blue Book Value, is approximately what it would then cost for someone else to purchase the car. The Blue Book price will be less than the original purchase price, but may still be high enough to require a used vehicle loan to purchase it.

Expect the interest rates on used car loans to be a few points higher than for new cars. These may vary from 7%-9%, with lower rates going to used car buyers with higher credit scores. If you cannot pay cash in full for a used car and need a used automobile loan, try to make the cash down payment as high as possible. A higher down payment means that you'll have a lower principal amount to finance on your used car's new loan. You will also pay less interest on the "previously-enjoyed" vehicle loan.

As with any major financial purchase, contact several different lenders to find one with the best annual percentage rates (APR) and payment terms. One source suggests visiting credit unions first, followed by your bank. Then ask the dealership what kind of terms they can offer. The dealer's used car loan program might surprise you with low APR and cash-back rebates, or it might be a worse deal than the bank or credit union. The only way to get the lowest interest rates and terms on used auto loans is to contact several lenders before buying your "new" used car.

Copyright 2008 by Doug Smith. All Rights Reserved Worldwide. Unauthorized Duplication Prohibited.