Should I Get a Loan for Buying a Used Car?

Rather than a brand new car that’s fresh from the showroom floor, you may be considering a used car instead. No matter your reasons for opting for a pre-owned vehicle rather than a new one, you could be thinking about financing your new (to you, at least) wheels. So, is this the way to go? Let’s find out.

Reasons to Consider Financing

One of the biggest pros of financing a used car is that you likely won’t have to borrow as much as you would if you were looking at brand new vehicles. That said, you may find that the amount you’re borrowing is the same if you’re looking at something like a used luxury vehicle or a used vehicle that’s only a few years old. Because you aren’t borrowing as much, you are likely to enjoy lower monthly payments, which your current budget may prefer.

While saving up and paying for a car, new or used, in full would be great, but you may not have the time to take that route. By financing a used car, you can have the wheels you need to work and get around while paying it off in smaller monthly payments, which you may feel more comfortable with. Financing comes with fees and interest, but at least you won’t have to worry as much about your current car breaking down while on your way to work or while you’re far from home, which can result in spending money on a tow truck and having to find alternate transportation.

Maybe you’re thinking about financing because you have a low credit score and have a feeling you won’t be approved for financing a newer car. If so, know that making on-time car payments to a used car dealership can help you improve your score.

Reasons to Think About Other Options

For all its benefits, there are some downsides to financing a used vehicle. For instance, there is a chance your insurance rates will be higher than they would be had you gone with a newer car. This is because an older vehicle may not have the same modern safety features of a modern vehicle, which is likely to be seen as a liability by insurance agents, resulting in higher premiums.

The questionable resale value of used cars also impacts how much you’ll pay in interest for financing. Lenders want to make money through financing, and they have the option of increasing interest rates on used cars in the event that the buyer changes his or her mind about owning the used car. Used cars may have a lot of miles on them, which can result in the buyer not owning it as long as he or she would a newer vehicle with fewer miles, which can result in the lender not making as much money on the loan.

Which Option Is Best?

So, are you better off financing or not? The final answer is ultimately up to you and your specific scenario and preferences. If you have a good credit score and your current vehicle can last you for a few more months, try to save up as much as possible to pay for a used car in full. If your credit score isn’t that great and your current vehicle is likely to give out on you in the near future, you could be better off opting for financing. Talking with a lender or professional financial planner could give you more insight and help you feel confident about your final decision.

No matter which end of the spectrum you fall on, you can’t go wrong bringing your business to Reliable Auto Sales. Come down for a test drive and to get all the answers you need about pre-owned/used cars.