Comparing the car loan rates involved in financing a brand new and a used car is an effective method that helps you decide which of the two types of car would fit your budget. Upon doing the comparison, it is important to look at the following:
Pros and cons of financing used cars
Financing a used car allows you to pay the loan off in a shorter period compared to a brand new one since most lenders usually offer short term loans for this type of vehicle. However, the interest rates involved in financing a used car is higher compared to financing a new one. This is because lenders are in greater risks in providing loans to finance a car since there is a greater possibility for the creditor to default on loan payments or run away from their financial obligations. High interest rates placed on used car loans therefore provide security to lenders.
Pros and cons of financing a brand new car
Financing a brand new car usually has lower interest rate compared to financing a used vehicle. However, you might be paying for the car in a longer period especially when the loan has a longer term. In addition to this, a long term loan might cause you to pay more than what is necessary because of the payments on the interest rate.
Besides these, there are other important points that you could use in doing the comparison. Some of these points are written below.
- Choose a car that you want to buy. Compare the prices of this vehicle when it is sold as brand new, used or pre-owned car. Take note of the primary amounts involved for this serves as the basis of the interest rate that you would be paying in case you would purchase one of these.
- Contact the dealerships, lenders, and institutions and inquire about the interest rate that they offer for a brand new and used car loan.
- Use an online car loan aggregator to help you compare the rates involved in financing a used and brand new car.