Options for Financing a Used Vehicle

| July 18, 2013

Financing a Used VehicleWhen calculating the true cost of a used car, there are a number of factors to consider in addition to the listing price. Used cars may require additional servicing or maintenance, and will incur different insurance rates than new cars would. If you are unable to pay for the car with cash, you’ll also need to think about the additional cost of financing. If instalments are spread out over several years, you could end up paying hundreds if not thousands of dollars in interest. ?Interest rates can vary considerably between lenders, making it important to examine all options carefully before making your purchase. You’ll want to keep the following issues in mind as you start your search for the best deal on financing.

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Buying from a Private Seller

More and more used car buyers are turning to online listings to find the best deal on a car. Many of these are posted by private sellers who are looking for a way to get the best price on their used car without a dealer taking a cut of the profit. However, this can make financing slightly more complicated for the buyer. A private seller is not going to offer you financing like a dealer would, and many will only accept cash. You may need to take out a short term cash loan in order to finance this purchase if you don’t have the money in savings. It’s helpful if you work out a budget in advance, so that you know exactly how much you’re willing to pay. If you’re interested in buying an SUV, for example, you’d want to read SUV reviews at motoring.com.au and other used car listings sites to see what the current price range looks like. This will help you set a more accurate budget as you prepare to take out a loan.

Buying from a Dealer

Used car dealerships often offer their own sponsored financing packages. These offer the benefit of convenience for buyers, who can secure financing at the same time as the car is purchased. Eligibility restrictions also tend to be relaxed for dealer-secured loans, as dealers are often willing to offer financing to those who may not otherwise be approved by a traditional lender. However, many of these loans charge high interest rates. If you have good credit, it’s worth shopping around and going directly to the lenders to see what sort of rates you might qualify for. Your local bank may be able to offer more attractive financing than your local dealer.

Setting the Loan Terms

Whether you’re buying from a private seller or a dealership, you’ll need to work out your loan before you drive away with your purchase. This will involve sitting down with the lender of your choice to specify the terms of your loan. You’ll need to determine factors like the length of the loan, your down payment, and the monthly payment amount. It’s recommended to pay at least 10% of the car’s value up front, to minimise your monthly payments and offset depreciation. Generally, the sooner you can afford to pay off your car the more interest you can save.

Before you start shopping around for a used car, you’ll want to keep these options in mind and follow the latest prices on a car news website. The right type of financing will depend on your personal situation, including the age of the car, its true market value, and how long you intend to own it before reselling.

Options for Financing a Used Vehicle

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