Used Car Loan Tips
A used car loan is a little bit different than financing a new car.
- Most lenders will not lend you money for a used car that is more than 4 or 5 years old
- Lenders charge at least 2% higher APR than they do for new car loans
- Online lenders have a lower premium on used car loans
- Private party and dealer transactions are handled differently
- In some cases you may be forced into dealer financing
Never Pay Cash for a Deposit on a Car
You may be wondering why I put this advice so high on the page. I think it's very important to alert you about this since most people don't ever think about it. If the deal goes south, you'll never get your cash back, but you can always dispute a credit card transaction. Most dealers are reasonable, but you don't want to risk putting yourself in this position. Why take the risk when it is so easy to avoid?
There are two different types of used transactions. The first is when buying from a dealer. The other is when you purchase from a private party. Depending on which route you take, there are different financing options available. Some lenders will not finance a private party transaction.
If You Plan to Purchase From a Dealer
It is easier to get a used car loan if you are buying from a dealer. It doesn't matter if it is a dedicated used car dealership or a dealer that has a used car department. Banks see less risk in this type of lending. Therefore, you will have more options when financing a used car. The online lenders we recommend below will generally beat the dealer's rates.
If You Plan to Purchase From a Private Party
Lenders see more risk when you buy from private party. Buying from a private party will usually get you a better price, but it will be much more difficult to get a used car loan. In addition you will be paying a higher interest rate. Up2Drive is one of the few online lenders that provides used car loans when buying from a private party.
Which site should you use? First make sure your credit score is at least 680, then as a prime borrower, you can choose by who has the lowest APR. People with bad credit pay higher interest rates. Get your credit report instantly online, it's a must for The Folder. DO NOT apply for a car loan until you get your credit report with credit score. Get it online at one of the big three bureaus. If your credit score is less than 680 Auto Credit Express may be your best option.The Big Three Credit Bureaus:
- Experian - You may recognize this company more from their freecreditscore.com commercials.
- TrueCredit - This is the consumer brand for Transunion, one of the big three bureaus.
- Equifax - This bureau has been around providing credit ratings since 1899.
Best Used Loan Sites
Up2Drive (a division of BMW Bank of North America) offers highly competitive rates and superior customer service.
- Up2Drive financing is not available to first time car buyers.
- Once approved, Up2Drive will send you a "Drive Check™."
- The Drive Check™ works similar to a personal check and can be used for Refinance or Dealer New/Used car purchases.
- You can negotiate the sale price of a vehicle as if you have cash on hand.
- Check today's online auto loan rates
- Lock your rate for 30 days.
- Never an application fee.
Auto Credit Express is designed for people with poor credit. Auto Credit Express requires you to have a monthly income of $1,500.00 or more and be able to obtain auto insurance.
Auto financing for people with lesser credit: If your Credit Score is below 650 and you're rejected, don't submit apps that keep getting you rejected. Submit one free application to a bad credit auto loan site like Auto Credit Express.
- They can find financing from high risk underwriters. Even if you have a discharged bankruptcy, tax liens or bad credit.
- If your credit score is 550 or above, your chances are good, also you should full time employment.
- If you have good credit but get rejected elsewhere for no car loan history.
Make sure you know that car's history
Before you even think about financing a used car, you need to run an AutoCheck Report and have a certified mechanic inspect the car. If you don't do both of these, and you end up getting screwed, don't email me. You have been warned. Learn more in our Vehicle History Report article.
Get An Extended Warranty for your used Car
Get an extended warranty for your used car. If you buy a 3 or 4 year old used car, that's when the manufacturer's warranty expires and all hell breaks loose. Unless you have an extended warranty, you are exposed to potentially large losses. The best car warranty sites we have researched so far are CARCHEX and their strong, well funded competitor WarrantyDirect. Click on the following link to read our complete guide on buying an Extended Warranty.