How to finance a used car?
The question of used car financing usually comes up at the very last moment, although it should be the first thing to consider before making a purchase. If you’ve been saving for a while and plan to make a payment in cash, you may skip this part. But according to the credit bureau Experian about 55% of buyers take out a car loan to pay for their deal. If you are in this majority, this article should be useful for you.
So, when it comes to financing a used car you might have a couple of options here. First of all, you might try to apply for a loan from a third party. But be ready to encounter a higher interest rate as lenders might consider used car loans somewhat riskier than new car loans. Also, if you have a bad credit history it might be really challenging to get a load from the bank.
But don’t get discouraged in advance as there is a second option. You can have a used car dealership to arrange your used cars financing.
How does financing a used car work?
We’ve put together all the steps of the used car financing process in order to help you avoid any pitfalls and misunderstandings so that make your car-purchasing experience absolutely stress-free.
Apply for a loanYou might want to apply for a load either through your bank or the dealership itself. Both options are available online, you can start your search by simply googling “used car lots near me that finance”. All you need to do is to complete the form with your personal information (usually you can do it online, there is no necessity to visit the bank), it’s done for the lender to consider the factors like your credit score, Loan Amount, Loan Length, and Debt-to-Income Ratio. Try to apply for several lenders so that you will get a higher chance to get a loan.
Choosing the lender
After being approved for the loan you might have a few options to choose among. Don’t rush and check carefully which used car finance rates you’ve been proposed. Compare the dealership’s in-house offers with external lenders’ ones. Choose the most appropriate offer for yourself.
Settle up the terms
The final step will be finalizing everything. The best way here will be a face-to-face meeting with a lender and signing all the documents. Don’t be afraid to ask questions. Find out every single detail that might concern you. It will help to make your car-buying experience absolutely clear and pleasant.
What is a good financing rate for a used car?
The used car finance rates, first of all, depends on your credit history.
To purchase the used cars with low monthly payments you should have a good credit score. On average, if your credit score is 750 or higher - your used car financing rates will vary around 5.00-5.01%, with the score 700-749 - the rate will be 6.29%, 600-699 - 11.06%, 451-599 - 16.27%.
These are just approximate figures, to get a more precise rate you may use a handy car payment calculator! This tool is created to ease the used-car buying process and give you more precise estimates on your used car financing rates.
What are interest rates on used cars with bad credit?
If you have bad credit, the lender will require a down payment of at least 10% or $1,000. The more your down payment is - the lower your next installments are. If you are able to make a larger down payment it will not only provide you with a possibility to get used cars with low monthly payments but also will greatly improve your credit history.
By the way, if you don’t have a sufficient amount saved for your down payment yet you might consider an offer of trade-in deals at RollsAuto where you have a possibility to trade your old vehicle for your down payment. Use the handy online tool to value your trade-in vehicle, bring it to the dealership, and they will make you an offer. You can then put the cash toward a down payment on the used car you want.
Questions to ask when financing a used car?
When it comes to finalizing your deal you should have a face to face conversation with your lender. Don’t be afraid to clear every point here. These questions will help you in clarifying further financing and make sure that you will not face any pitfalls.
What is the down payment?
As we’ve already mentioned there will be a down payment on your purchase, especially if your credit score is not the best. So in order to avoid any misunderstanding talk about it in advance. Ask what amount is appropriate, how will it affect further installments. And remember that the more your down payment is - the lower your next installments are. Plus, if you want to improve your credit score, the higher down payment will be a good advantage.
What’s the purchase price?
The dollar amount on the window sticker is not necessarily the price you pay. Before you leave the house, find out the invoice price (what the dealer paid) for the car you want to buy. Track the vehicle’s VIN. It will give a clear picture of your purchase.
Use a car payment calculator to check the precise amount of the purchase and check it with a lender.
Are there additional costs that will be charged on this loan?
Another important question to ask your lender involves the addition of extra costs and fees. Some loans have added charges. These costs may be fees for services provided on behalf of lenders, such as requesting your credit report, or car title application. It’s good to know about these costs early since a lender may ask you to pay these fees upfront.
How long will it take to pay off the car?
This question should be carefully discussed in advance. You need to understand exactly how much you pay every month, what are the interest rates you are paying, how many installments there will be. Clarify every single point here, and even write everything down in advance in order to avoid any surprises in the future.
To sum up, we’d like to notice that if you come up with an idea to purchase a new vehicle it’s essential to understand how to finance a used car and what issues you can in this process. We hope that this article will guide you smoothly through all the key steps, and will help you find the best out of all the used car finance deals.