Interest rates are slightly higher for used car loans, although you're likely to finance for less money because of the cost difference between a new and used vehicle. Term options for your loan may also be affected depending on the year and mileage of the car you want to finance.
Manufacturer Incentives
You may find special interest rate offers if pursuing a new car purchase. Check the websites of manufacturers and individual dealerships to find out if offers exist. Interest rates offered by manufacturers for new cars are lower than you can find on your own, such as a zero-percent interest rate or a 3.9-percent offer for 72 months. Rate offers are usually optional; you may choose low-rate financing or cash incentives, which are immediate discounts from the vehicle's sticker price. Use an auto loan calculator to see which option saves you the most money.
Used Car Rate Offers
Used car rate offers are far and few between, but some may exist. Call dealerships in your area to find out if any offer low-rate used car financing. You are not likely to find a zero-percent option, but may obtain slightly lower rates than comparable lenders. You can find the rates for new or used cars online by visiting the websites of different auto loan providers. Used car rates are slightly higher than new car offers.
Term Options
Your term options may be affected by the vehicle and lender you choose. If you choose to purchase an older vehicle with high mileage, expect to obtain an approval for a shorter term, as the bank must consider the vehicle's depreciation and loan amount. You may also pursue a longer loan term if purchasing a new car if price restrictions exist. For example, you may be able to pursue an 84-month loan as long as you finance at least $35,000. Interest rates increase beyond 60-month loan terms.
Lease Option
Used car lease options rarely exist. If you do find the option available, compare the cost of financing the vehicle to leasing it and you'll likely find a lease is not financially beneficial. Low payment lease deals exist on many new car models. Leasing requires you to pay only for the car's depreciation over the contract term instead of the vehicle's total value, so payments are cheaper than financing. Just like rate incentives or rebates, lease offers are also listed on the manufacturer's website. You must abide by mileage, repair and maintenance restrictions for leasing.
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