Purchasing a new or used vehicle is an exciting time that can be hampered by uncertainty in financial decisions. Understanding how used car financing works before you step into the dealership can give you the confidence you need to negotiate well and make sound decisions in your vehicle purchase. Researching common terminology, understanding how used vehicle financing works, and gaining insight on acceptable interest rates can offer you an advantage when you start filling out the paperwork for your used model loan or lease at Square One Auto.
A major consideration to make is that interest rates for used vehicles are typically higher. Due to their lower prices, lenders do not have to be as competitive with interest rates. Not to mention it benefits them to charge higher interest for used vehicle models. Available loan terms are also often shorter for used vehicle financing. This is because the expected life of a used model is reduced compared to a new vehicle, so lenders want to increase their likelihood of being paid off before the vehicle experiences a major issue. This can benefit both the buyer and the lender because it allows the vehicle to be paid off faster.
When you consider a used vehicle purchase, you should also consider trading in your current model for a credit. Most used vehicle financing agreements require a down payment, but you may be able to get this waived with a fair trade-in. Use this to your advantage to rid yourself of an extra vehicle and get ahead financially in your new auto loan by trading in your owned vehicle. If you do not have a vehicle to trade in, keep in mind that a down payment will typically be required for a used vehicle loan. Our financial professionals at Square One Auto can guide on financing a used model, too.