We often think of car loans as something you get when purchasing a new vehicle. But many people actually take out loans to buy used cars. Financing is available for both new and used vehicles.
There are some things to think about when getting a car loan. Some apply to both new and used cars. But other considerations are more specific to financing a used vehicle. Here are some tips on choosing the right loan for a used car purchase:
- Shop around at banks, credit unions, and dealers to compare interest rates and terms. Rates may be higher for used cars.
- Get pre-approved for a loan before shopping. This gives you bargaining power and shows the dealer you’re a serious buyer.
- Understand your budget. Include the loan payment, insurance, gas and maintenance costs.
- Check the used car’s history report for accidents, repairs and ownership. This affects value.
- Consider a shorter loan term like 3 years. It lowers interest paid over time.
- Make a sizable down payment if possible. This reduces the amount borrowed.
- Inspect the car thoroughly. Know any maintenance issues that may arise.
Looking at all these factors will help you find the ideal financing for your used car purchase. Let me know if you need any clarification!
3 steps to getting a loan for a used car
1. Check Your Budget
Before even looking for a loan, figure out what you can realistically afford. Like with a new car, account for the down payment, monthly payments, insurance, repairs, and other costs. Know your total budget.
2. Decide the Loan Length
Next, determine the loan term – how many months it will take to pay it off. Terms often range from 24 to 84 months. Use an online calculator to estimate monthly payments and find the right term for your budget.
3. Apply for Loans
When applying for a used car loan, you have options beyond just the dealer or bank. These can reject you if your credit is low.
Instead, you can work with an online retailer like Canada Drives. They have relationships with many lenders, including for bad credit. You can get approved and handle everything conveniently from home.
So know your budget, pick an appropriate term, and look beyond just banks and dealerships when applying for a used car loan. This will set you up for success! Let me know if you need any clarification.
What to watch out for when buying a used car
Affordability
If you know the used car’s price, calculate if it fits your budget – including loan payments, insurance, etc. Don’t choose a car that costs too much for what you can afford long-term. This can hurt your credit and finances if you miss payments.
Get pre-approved for a loan first to understand your price range before looking at cars. This soft credit check won’t lower your score.
Market Value
Research the used car’s book value or listed value online. You want to avoid overpaying. Check sites listing make, model, year, mileage, and condition to determine average value.
Bookmark Canadian Blackbook. It shows average asking prices for any car you’re considering.
Vehicle History Report
Get a CARFAX report to see the car’s full history – accidents, repairs, previous owners. Many dealers provide this, but private sellers likely won’t. Always review before deciding on a used car.
Private Sale vs. Dealership
Weigh pros and cons of buying from an individual or dealer:
- Private sale may have lower price but more risk on reliability. No professional inspection.
- Dealerships inspect and recondition vehicles but may charge more in fees.
A third option is Canada Drives. As an online retailer with lower overhead, our savings get passed to customers through things like:
- Free CARFAX reports
- 150-point inspections
- Soon-as-same-day delivery
- 7-day Love It Or Return It Guarantee
So consider affordability, value, history, and seller when financing a used car. This will lead to the best loan terms and experience. Let me know if any part needs clarification!
