New car loans vs. used car loans: A helpful comparison for car buyers

New car loan vs. Used car loan


Weighing your options on a new or used car?

It’s wise to consider new vs. used car financing as part of the process as it may have a big impact on how much you pay for the vehicle when all’s said and done.

Advantages of buying a new car and new car loans

The appeal of buying a new car never gets old: a chance to own a vehicle in pristine condition, complete with the latest technology and safety features; your choice of models and add-ons; a manufacturer warranty, and no history of maintenance issues, for example.

There are plus points to new-car financing worth some serious thought too:

Lower rates than used cars – New-car rates are typically lower than those of used cars, says the Federal Trade Commission (FTC), although financing periods are normally longer for new cars.

Special rates – Automakers sometimes offer incentives like zero or low annual percentage rates (APRs) on certain models and model-year vehicles, which may reduce buyers’ finance changes. Such rates are not typically negotiable, and may be dependent on a consumer’s credit history and other requirements. However, “when no special financing offers are available, you usually can negotiate the APR and terms of payment,” advises the FTC, which applies to both new and used cars.

Bonus cash – Money off a vehicle’s sticker price is another common manufacturer incentive on new cars.  Bonus cash and a special low rate are not normally offered together, though.

Sales events – Look out for year-end and holiday sales events when many carmakers offer a range of incentives including special rates and bonus cash. These are some of the best times to find new-car deals.

Advantages of buying a used car and used car loans

Used vehicles offer buyers potential benefits as well, with lower average prices the main attraction for many. And there are plenty of good quality, nearly new and certified pre-owned models available. For example, RoadLoans, a leading auto lender, works with a network of more than 14,000 dealerships across the country offering high quality used (as well as new) vehicles meeting our standard for age, mileage and financing.

Here are some of the potential advantages to used car loans:

Slower depreciation – New cars lose about 20 percent of their value in the first year, so buying a pre-owned vehicle means someone else has already taken that depreciation hit. This may also reduce the chance of later becoming upside down on the loan – a situation where you owe more than the vehicle is worth. Other factors, like whether you made a down payment and traded in a vehicle, will also come in to play here.

Shorter loan terms – Used cars may be associated with higher APRs than new ones but, typically, they have shorter loan periods, which means debt is paid back quicker.

Making a decision

Whether a new or used car, and new vs. used car loan, is right for you will depend on your own set of circumstances, such as your particular car-buying needs and preferences, and what your finances are like.

Budget wisely, says the Consumer Financial Protection Bureau, so you have a better chance of getting a car loan you can afford.

  • Consider starting with a budget calculator to estimate what could be allocated for a car payment.
  • Try an affordability calculator to gauge what you can pay for a vehicle in total.
  • Use an auto loan calculator to familiarize yourself with the effect of APRs and loan terms on potential car payments.
    When you’re ready for financing, shop around for the best deal and consider online lenders like RoadLoans.

    With RoadLoans, you can apply for new and used car loans in minutes and get an instant decision. If approved, you can then visit the dealership already knowing the terms of your loan, and shop with the confidence of a cash buyer. RoadLoans accepts applications for private party auto loans too. All credit types can apply.

    Apply for a new or used car loan online.


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