Used Car Auto Loans: 10 Useful Tips You Need To Know

used car auto loans

Used Car Auto Loans

New, used, certified-Preowned — no matter what kind of car you’re looking to buy there are a set of challenges that come with every car shopping experience. For instance, taking out used car auto loans shouldn’t have to be one of those challenges.

used car sales person with mini car

If the idea of finding a lender and securing financing is one that worries or confuses you, then you’ve come to the right place.

Check out these 10 tips to guide you in the right direction:

1. Know Your Finances

Before you step into a dealership you should already know how much you have to spend. Including what condition your credit is in.

Evaluate your budget and determine how much you can afford to put down on your car purchase. In addition, roughly how much you’re willing to spend per month on payments.

You should also have an idea as to where your credit score is and how to interpret your score.

Using a free online service to view your score will prepare you for knowing where you stand before you apply for used car auto loans.

2. Go Rate-Shopping

Just as you aren’t going to purchase the first car that you test-drive, you shouldn’t go with the first loan rate you’re offered.

Shopping around for the best rates and applying to several lenders should be your first step.  Finding financing should be top of mind before you begin the process of actually purchasing a car.

3. Choose the Right Lender

The deals offered will vary with the type of lender you take out your used car loan with.

Figure out exactly which type of lender is right for you.

Banks

Bigger banks are more likely to cater to those with higher credit scores and typically have more conservative loan practices. Applying for used auto car loans at a big name bank will probably mean facing stricter policies. In fact, you won’t have much wiggle room for your personal needs.

Credit Unions

If you happen to be a member of your local credit union, this could be one of the best places to go for used auto car loans.

Because credit unions are non-profit establishments, they are capable of offering their members incredibly competitive loan rates. If you have have a prior relationship with your credit union or loan officer you may receive better offers.

Dealership Financing

Though typically not the most advantageous option, certain manufacturers may have their own partnerships with financial institutions. In fact, they will be able to provide you with better deals.auto dealership used cars

Compare and Decide

It’s always best to compare your options and figure out what is available in your area. Including what works best for your own personal situation.

4. Get Pre-Approved

Go into the purchase of your vehicle with the peace of mind that you know how much you have available to spend.

Knowing how much you’re going to have to pay overtime will help you avoid stress where it isn’t needed.

Pre-approval before you begin shopping will help keep you within your original budget. In addition, there’s less ability to go beyond what you’re already approved to borrow.

5. Keep Time in Mind

Ideally, you want to finance your loan over the shortest amount of time you can afford.

The less time that you spend paying off used car auto loans, the less time your loan accrues interest.

This isn’t to say that you should overwhelm yourself by taking on a loan with terms that are too aggressive for you to pay comfortably. As a matter of fact, be realistic about what you can afford.

6. Be Careful with Credit Checks

Knowing the difference between a soft and a hard pull on your credit and what the lender you’re applying to is using, is important.

Some lenders will only do a soft check on your credit which does not negatively impact your credit score, but also provides the lender with less information.

On the other hand, some lenders will do a hard pull on your credit which produces your full credit score and history. This will lower your credit score and stay on your report for up to two years after it’s done.

Be aware of the type of credit check the lenders are using. This will help to keep the negative marks on your credit to a minimum.

7. Online vs In Person

There are a few different options for applying for used car auto loans both in person and with online services.people surfing online

By browsing online for deals and using an online lender its possible to be more efficient and save money in the long-run.

Learning more about online lenders will be helpful in this decision-making.

8. Don’t Focus on the Monthly Amount

When you’re shopping for your vehicle the salesperson you’re working with will likely ask you how much you want to pay a month. However, it’s important not to focus on the monthly payment amount too much.

If you get too caught up with the monthly payment amount and don’t keep in mind how much you’ll be spending overall, including interest, you may end up shelling out more money than you intended to.

9. Avoid High-Interest Rates

This may seem like a no-brainer, but you’re going to see a range of interest rates. In fact, you’re going to want to select the offer with the lowest rate over the shortest amount of time.

The average interest rate for used car auto loans is 3-5% but can be as low as 2% given a good credit score and the right lender.

If you’re being offered a loan with an interest rate higher than 5% it’s in your best interest to keep searching.

10. Finalize the Deal

Some dealerships will not consider your deal closed until the money is in their hands.two people agreeing on used car auto loan

To keep yourself from being tricked into a higher price than agreed upon, make sure any deals made in the dealership are finalized before you leave.

Find the Best Used Car Auto Loan

Use these 10 tips and don’t settle until you’ve found the best deal possible for your needs.

To learn more about used car auto loans and other ways to improve your credit intelligence, check out our other blog posts and subscribe to our newsletter today!

For more information about financing, loans, and credit, check out Credit Squared!

 

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9 Comments

  1. Hey, Great information Patrick! 

    My wife and I recently bought a used car, about a year ago, I guess.

    That’s pretty much what we did as far as comparing rates, banks, credit union, and the dealership. 

    This blog review would be very useful to younger people who don’t have much experience with auto financing. 

    You are 100% in all that you covered and I think you pretty much covered it all. 

    What my wife and I found out, the dealership had the highest interest, the bank was in between, and our credit union was the least interest.

    So naturally, we financed it through our credit union. Good Advice! God Bless! Wayne

    • Wayne – Thanks for your insightful comments. 

      I agree, consumers that don’t have experience in financing used car auto loans will find this article helpful.

      Sounds to me like you did all the right things and were prepared before you went car shopping.

      I have found that credit unions usually have the best auto financing rates. 

      If a car buyer is doing this for the first time and they have a local credit union nearby, it’s worth becoming a member.

      One can save hundreds of dollars over the life of the loan by shopping the best rate.

      Thanks,

      Patrick

      Creditsquared,com

    • Michael,

      Glad to help out.

      Please share the content with your friends and family, so it can be shared.

      This way the information will get into more peoples hands.

      Thanks,

      Patrick

      Creditsquared.com

  2. Hi Patrick,

    Where were you when I was buying my first car?

    You have some great tips on used car auto loans and your advice would have come in handy then.

    Great points about being aware of the condition your credit and how much you think you can afford.  It really hit home about knowing your credit score and how that can effect the rate you pay on an auto loan.

    If I had known this before I went car shopping, I may have been more prepared to get a better deal.

    I understand your point about not getting caught up with the monthly payment. Focusing on payment more than  price will cause you to spend more money than intended. 

    This happened to me and I ended up paying more than what the car was worth.

    Thanks for the great info.  I’m now much more informed for the next time I buy a car.

    • Hi Emelda,

      I appreciate your comments about the post.

      It’s always a good idea to be prepared before you go car shopping.  Lots of bad things can happen related to your finances if you’re not aware of everything you need to do.

      This post about 10 useful tips to know about used car auto loans was intended to get people thinking about whats important and set them off in the right direction.

      There is plenty more to learn here a Creditsquared related to car buying and financing the new purchase.  Here is a link to all of my posts related to auto financing.

      Creditsquared Auto Finance

      Thanks again,

      Patrick

      Creditsquared.com

  3. Thank you for all the information about used car loans. I really like how you mentioned that before you step into the dealership you should already know how much I can spend. I think that would be really smart to know exactly how much I can pay before I go looking for a car.

    • Hey, thanks, Deb! There is no better strategy than being prepared before you step into the dealership. Know what car you want and what you are willing to pay. Most importantly have your financing pre-approved, so you are only negotiating price and not payments with the salesperson. All the best.

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