Buzz
Depending on your loan terms, the interest on your car loan can quickly accumulate. Several factors will influence your rate, including whether the car is new or used. GOBankingRates discusses why pre-owned cars often come with higher interest rates.
One reason for the increased rates is that buyers of used cars tend to have lower credit scores, which results in higher interest rates. Additionally, new cars often come with attractive incentives, giving dealerships room to offer better terms. On top of that, it's more challenging to assess the value of used cars.
New cars typically lose around 10% of their value the moment they leave the dealership, according to Carfax. However, with used cars, the situation is more complex. They may have mechanical issues, past accidents, or other hidden problems, as GOBankingRates points out. They note:
To minimize the risk of financing older vehicles, lenders generally reserve the most favorable car loan interest rates for new car buyers. For example, Alliant Credit Union offers rates as low as 1.99% APR for new vehicles, but only 2.24% APR for used vehicles, as of January 12, 2017.
The figures will vary based on the vehicle and your credit score, but this information is valuable if you're considering purchasing either a new or a pre-owned car. For more details, check out the full article linked below.
Photo by Negative Space
