What to expect from average loan rates for used cars

It is important that you to know the existing used car loan rates before buying a second hand vehicle. This allows you to make a realistic budget and determine the ways on how to secure the amount needed for the payments involved in a used car loan. It is therefore necessary to take note of what to expect from these rates. The content of this article serves as your guide about the realities of loan rates offered for used cars.

Auto loan prices vary

The rate of loans varies from one state to another. This is brought about by different factors such as the taxes placed on the loans for each state. The rates also differ upon the type of car you intend to finance through a car loan. This means that a variation of one to two percentage points is common.
The rate variations from one state to another for one to three-year old cars are evident based on the following examples:

  • Miami, Florida- 7.70%
  • Chicago, Illinois- 6.48%
  • Boston, MA- 8.57%
  • San Francisco, California- 8.07%

Car dealerships are not the best choice

Although car dealerships can easily provide loans, it is still considered as one of the least preferred option. Their loan rates are usually higher compared to those provided by banks and other credit unions. Since most dealers are not lenders, they obtain loans from other providers and place some add-ons before giving it to their customers. These add-ons or mark-up rates provide dealers with extra source of profit.

Pre-approved loans are important

Always bear in mind that it is important to obtain a pre-approved loan before going to dealerships to purchase a used car. The pre-approved loan provides you with the leverage to negotiate with car dealers.

Collaterals can reduce the loan rates

Providing collateral for a car loan helps you obtain lower rates. A good example of collateral is your house. However, it is important for you to pay the monthly payments of the loan to prevent lenders from taking the collateral. Once you default from the financial obligations you have with the lender, they have the right to repossess the collateral you provided for the loan.