Auto car loans come in handy for people who want to buy a new or used car but don’t have the money to buy it. There are different types of loans, interest rates, and loan term lengths, which makes it challenging to find the best auto loans.
There is also the decision of deciding which is better between a new car loan and a used car loan. The decision depends on the amount people want, interest rate, and loan term.
Used Car Loans Vs. New Car Loans
The main difference between the two auto loans is the amount people get. Used cars cost less than new cars, which translates to lower loan amounts, making used car loans more affordable for many car buyers.
The lower loan amounts mean that used refinancing an auto loan also has shorter loans and lower monthly payments, which many car buyers can afford. That reduces or eliminates the chances of getting behind on loan payments, which helps improve credit scores.
When applying for a new car loan, buyers with a high credit score have higher chances of getting approved than those with lower credit scores. However, lenders accept and approve applications from people with different credit scores for a used car loan.
According to Lantern by SoFi, that increases the chances of anyone getting a car, and with timely payments, it might help people build their credit score.
Another advantage of used car loans is that borrowers never have to worry about being upside down on loans, which occurs when they owe more money than their car is worth. That is because used cars don’t depreciate as much as new cars.
New cars lose up to 20% of their value over the first year. When people buy used cars, the original owner already bore that loss and the depreciation rates are usually lower. With used vehicles, people can reduce the amount they have to pay by trading in their old car or rolling over a loan.
One main advantage that new car loans have overused car loans is lower interest rates and Annual Percentage Rates (APRs). APR represents the cost you pay annually for borrowing the loan, including the interest rate and extra charges, expressed as a percentage.
People who buy new cars might also get special deals and rates from automakers, like low or zero APR for specific car models, which acts as an incentive. Most of these deals depend on the buyer’s credit and are not usually negotiable.
If there are no special deals and offers, car buyers can negotiate the rates, but the negotiating power depends on the customer’s credit score. New car buyers can also enjoy bonuses from car dealers, which is usually an incentive to buy new cars. These mainly happen during times like the holidays, black Fridays, or before a new car model launch.
Before deciding where to get an auto loan, people need to research terms, interest rates, additional fees, loan terms, and the car dealers that lenders work with. For example, financing an auto loan is an option that helps people find car loans with better interest rates and terms than their original ones.