If you are about to retire the current car you are driving and need to replace it with a different car, you might want to know whether it would be better to stick with choosing a used car or a new car. While both options can be good choices, there are often some differences in car loans between new and used cars that you might want to factor into your decision.
The interest rate
One of the key differences you will usually find between new car loans and used car loans is the interest rate. Lenders generally offer lower interest rates on new cars, while the rates they offer on used car loans will typically be higher. The interest rate you get on your loan will greatly affect how much your payments end up being, and the interest rate will also determine how much money the loan costs you overall. In some cases, lenders will even offer 0% interest rates on new cars for a specific amount of time, which means you would pay no interest at all on the loan if you paid it off within that time.
The amount and length of the loan
While the lower interest rate might seem attractive to you as you compare these two options, you should realize that when you buy a new car, you will likely be borrowing more money. New cars cost more than used cars, so even though you have a lower interest rate, your payments might be higher simply because of the difference in the cost between a new and used car. Additionally, a new car loan might be longer in terms of duration. You may have to take a five or six-year loan to make your payments low enough to afford if you buy a new car, while you might be able to afford to pay off a used car loan in just two or three years.
There are other factors that affect this too
Not only are there differences in the things mentioned, but it is also important to know that your credit will play a role in the loan that you qualify for, too. If you have great credit, you could expect a great interest rate and easy approval. If your credit is not so great, you might still qualify for a loan, but the rate would be higher.
As you prepare to shop for a new car, you may want to arrange a loan beforehand to make it easier for you to decide what type of car to purchase.
For more information on auto loans, contact a lender near you.
Share9 July 2019
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