Let us know if you have any questions about used car financing, used car loans, or credit scores. You can read our answers to the most frequently asked questions our customers ask us, but if you still have a question about your financial situation you can contact us at any time! Our finance team are ready to lend their experience and advice to help you get an affordable used car loan.
What used car loan interest rates do you offer?
There are a number of factors that affect what interest rate you can get for a used car loan. The main factors include:
- Your credit score
- Your current employment and income
- How long the term of the car loan is that you want
- How much of a down payment you make
This information is then sent to the automotive lending companies in the area along with the loan amount and length that you are applying for. If it is approved, the lending company will grant the loan for the amount and length you applied for with an interest rate based on your credit rating.
Why does used car financing have higher rates?
You might have noticed that used car loans tend to have higher interest rates than new car loans. This is because car manufacturers offer a lot of financial incentives to buy, lease, or finance their new cars, including by offering lower interest rates or even deferring any interest payments for the first X months of the loan. They do not offer these incentives on used cars, however, which does cause interest rates for second hand vehicles to be higher.
In addition, used car financing tends to be riskier for banks and car loan companies. Pre-owned vehicles are more likely to break down to the point that it is written off. If this happens before the loan is paid off, that affects how the rest of the loan remaining is paid off. Used vehicles are also more likely to be bought by people who don’t have as much money, have a bad credit rating, or have no credit at all. Both of these uncertainties are why financing institutions issue higher interest rates for used car loans to mitigate the greater risk.
How can I get a lower interest rate on my used car loan?
If you want to get a lower interest rate on a used car loan in order to lower your monthly loan payments, there are a few ways to do it:
- Pay a bigger down payment
- Use the value of a trade in vehicle towards a down payment
- Request a loan with fewer years
- Get a friend or family member to co-sign the loan
Getting a co-signer for used car financing is a common way for people with bad credit or no credit to get an approved loan that they wouldn’t be able to otherwise. Having an extra person with a better credit rating helps reduce the risk for the used car financing company, so they are more willing to approve the loan. They might even offer a slightly lower rate. Co-signing a car loan is more complicated, however, so make sure you and your co-signer fully understand how it works for both of you.
Can I lease a used car?
The only way to get a lease on a pre-owned vehicle is by taking over an existing lease from another individual. To do that, you need to work with the individual and their financing company. We do not facilitate any lease takeovers, and you cannot take out a new lease on any of our used cars. You can only buy them outright or take out a loan to finance the purchase.
How do credit scores and credit ratings work for buying a used car?
Your credit score is a number between 300 and 900 that tells financing companies how reliable or risky you are at paying off a loan. They will use your credit score to approve or disapprove of a loan and decide on the interest rate for the loan payments. People who are just starting to build their credit or who have a bad credit score will have a rating starting at 300, while a rating of 900 is the best possible score for people who have a long history of having a paying job and no missed payments.
When you apply for a used car loan, all of the information on your credit file is requested from the credit bureaus, who then send back your credit score to show how much risk they believe you represent in paying off a loan. Having a higher credit score means you will be offered lower finance rates and higher limits on your loan, so you can finance used cars that are more expensive. Having a lower credit score means you are perceived to be at greater risk of failing to make payments in the future, so you will be offered lower limits and higher interest rates on a used car loan.
How can I improve my credit score?
If you are a young adult just starting to build a credit history, or if you have a bad credit score, you can increase your rating by starting to consistently make payments on things like:
- Utilities — cell phone bills, internet or cable, power and water, etc
- Housing — apartment rentals, mortgage payments, etc
- Credit payments — credit cards, lines of credit, etc
- Loans — car loans or leases, bank loans, student loans, etc
When you build a history of consistently making payments on time, it shows credit bureaus and financing companies that you are more reliable and they can trust that you make your used car loan payments if they approve it. The other big factor is by having a job that consistently pays you enough money to easily make your payments.
If you have things like debts, a mortgage, or other loans that you still are making monthly payments for, that can also affect your credit score. Having other payments means what income you earn is tied up into payments you have to make, making it more likely you miss a payment for any new loan you take out. Paying off any debts or loans completely is also a good way to improve your credit rating.