Used Car Auto Loan Basics

Car loan application

Pre-owned auto loan tips to help you get the terms and the rates that are right for you and your used car

If you're in the market for a used car and need financing, be sure to do your homework to get the terms and rates that are right for you.  In this section, we offer important advice to help you get the best used auto loan without breaking the bank.

Used Auto Loan Providers

You can get a used auto loan from dealers, banks and credit unions and, in some cases, manufacturers.  Dealers typically have relationships with multiple financing companies which means they can facilitate used auto loans for people with various types of credit.  When it comes to financing through your bank or credit union, you'll probably find the lowest rates if you qualify. Finally, it's possible to finance through the manufacturer if the car meets certain guidelines, such as certification or model year requirements.

Used Auto Loans through Banks and Credit Unions

It's a good idea to begin your auto loan research by checking rates and terms at banks and credit unions, since these are the organizations that usually offer the lowest rates.  Keep in mind that when it comes to an auto loan, you need to consider all the numbers, including the amount of your down payment, the interest rate and the length of the loan. 

Used Auto Loans and Dealers

Dealer financing is convenient, since a majority of the car buying process — from the test drive to the completion of DMV paperwork — is handled there.  But convenience comes with a price.  Dealers actually make money on financing by tacking onto loans added fees and extra percentage points that, in turn, become the dealer's commission when he sells the loan to another lender. Hence, the higher the additional fees and extra interest, the higher the dealer's profit.

Regardless, it's still possible to find competitive dealer financing rates if you do your homework. Don't sign on the line until you look at the entire picture, including the total price of the car, the interest rate you're quoted, any additional fees that accompany the loan, your down payment and the length of the loan.  And don't negotiate financing until you've settled on a final price for the used car you're interested in buying.

Used Auto Loans and Manufacturers

It's possible to finance a used car through the manufacturer (and manufacturers usually offer competitive rates) if you — and the car — meet certain requirements.  For example, you can borrow from the manufacturer's finance arm if you qualify from a credit perspective and if the car is certified and less than five years old.

How to Get a Used Auto Loan

First up, research interest rates and terms by getting quotes from multiple sources.  The Internet makes it easy to apply for multiple online quotes from a variety of lenders, from the convenience of your home or office. 

Next, compare the quotes and terms you've received and pay attention to the APR, or the interest rate of the loan with all additional fees included, since this is the true interest rate you'll be charged.  Be mindful of the length of the loan too, since this will ultimately impact the total amount you'll pay.

Finally, pick the used auto loan that's best for you and your financial situation, review all documents carefully for anything you may have missed in the fine print (including pre-payment penalties) and sign and complete the necessary paperwork.

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