A used auto loan usually carries a higher interest rate, typically 2%, than a new auto loan
most banks will not lend you money for a used car that is older than 4 or 5 years old so bear that in mind. For car buyers looking for used car auto loan for cars that are 4 or 5 years older, it helps to have money saved for that purpose.
For car loans older than 4 or 5 years, other sources are home equity loan and loan from family.
Home equity loans makes good sense because the prime rate is low. You'll get a good interest rate and the payments will be tax deductible. But this kind of loan holds some risk: such a loan might leave you in danger of losing your house. You won't like losing your home just because of a car but desperate times might happen that can cause such a sad event.
Your family may loan you the money needed for a cash transaction too if you buy the car from a private party. Cars depreciate half their value in 3 years. So a 5 year old car generally wouldn't be too expensive if bought for cash.
Used auto loan sources are plentiful for cars that are less than 5 years. When looking for a used car, securing financing should be the first step that you do. If you have your
financing already in place, you'll avoid dealers charging you more than what is necessary.
When looking for used cars, visit these pages to have an idea of where to look for it other than in your neighborhood's driveways:
The following are the places where you can get a used car auto loan:
Local banks and credit unions. You can have these loans approved before you even hit the auto dealers' showroom. These sources of used car financing will usually offer the lowest rates you'll find, and credit unions are generally lower than banks.
Online lenders. In recent years, Internet-only finance companies such as Up2Drive and Roadloans.com have appeared, offering very attractive rates and contract lengths. These loans can be handled entirely on the Web, putting a buyer's check in your hand in just a few days that can be used at a dealership or for a private-party purchase.
Home equity loan. You'll get a good interest rate and the payments will be tax deductible. But be
cautious because you are practically putting a lien on your house just for a car purchase.
Family and relatives loan. Your family can lend you money or co-sign for your used auto loan. If you don't have credit or your credit isn't too good, your family can co-sign but if you are not careful with your payments, you might ruin their credit as well as yours.
Dealer/manufacturer. Dealer/manufacturers' loans generally cost more but those zero-percent deals are surely enticing. Be warned that the loans they offer you often cost more than you realize because sometimes they require "dealer participation," which is doublespeak for the dealer having to subsidize the below-norm financing for the used auto loan.
So how would dealers recoup those expenses? Dealers have a wide arsenal of weapons to line their pockets with your cash so be careful. One of them is by raising the price of the car. But you have already done your homework by doing your research of those internet websites so you are covered. Print those car comparisons and make them as your reference point when haggling with a used car dealer or an individual seller.