Should you buy new or preowned this time? A quick comparison of new vs. used auto loans can be a useful part of that decision-making process. After all, if you’re committing to a financing contract for a number of years, you’ll want to make sure it works for you and you’re comfortable with things like interest rate, monthly payment and what you’ll end up paying for the vehicle in total. Read through the advantages of each type of loan, below, to understand which may suit you best, and learn how RoadLoans customers enjoy more control in the car-buying process.
Advantages of new car loans
Lower rates – Interest rates and APRs are typically lower for new cars than used vehicles, although financing periods are usually longer.
Special rates – Automakers often offer incentives like zero or low APRs on certain models, which can be a big draw. Such rates are not typically negotiable and may be dependent on a consumer’s credit history and other requirements, however. It’s also worth knowing that, when there’s no special financing, rates generally are negotiable – for both new and used cars.
Bonus cash – Money off a new-car sticker price is another common incentive provided by manufacturers. Bonus cash and a special rate are not normally offered together.
Sales events – Look out for year-end and holiday sales events when carmakers offer a slew of incentives. Black Friday through New Year, in particular, is one of the best periods to get a deal.
Advantages of used car loans
Smaller loan amounts – Lower average prices and smaller loan amounts simply make financing a used car more affordable for many. The average loan amount for a new vehicle was $30,958 for the second quarter of 2018, compared to $19,708 for used, according to Experian data.
Slower depreciation – New cars lose 20 percent of their value in the first year, so buying preowned means someone else has already absorbed that loss. For this reason, buying a used car can also reduce the chances of becoming upside down on a loan, where you owe more than the car is worth. Other factors, like whether you made a down payment, traded in a vehicle and rolled over a loan will also come in to play here.
Shorter loan terms – Used cars may be associated with higher APRs than new ones but they typically have shorter loan periods, which means a shorter path to being car-payment free.
Accessible to a broader range of credit types – New car loans tend to be secured by consumers with good credit, while lenders will often welcome applications for used auto loans from consumers with all credit types. At RoadLoans, we have many years of experience helping customers across the credit spectrum get on the road in great quality vehicles.
Use auto loan calculators to help you decide
Working out your budget then using auto loan calculators to estimate what you may be able to afford to pay for a vehicle in total, and as a monthly payment, will also help you decide whether new or used is the way to go. Use RoadLoans’ online tools to enter and adjust values including loan term, APR and down payment and see how the numbers shape up.
New or used, apply for preapproval and shop with confidence
Whether a new vs. used car loan looks better, take control of the car-buying process by applying for preapproval. As an online lender, RoadLoans enables car shoppers to apply for financing in their own time and get an instant decision. If approved, you’ll know just how much you have to spend before visiting the dealership, and can negotiate on price like a cash buyer.
We work with friendly auto dealers across the country able to show our customers select new and used cars meeting our high standards for age, mileage and financing, so they can buy with confidence. Take a few minutes to complete our secure one-page application and see if you’re approved.
Apply for a new or used car loan and get an instant decision.