How do new and used car loans differ?

Nov 19, 2020

Two people looking at a touch screen with papers on the table making a decision

What is the difference between a new and used car loan?

Shopping for a car is often a confusing time for drivers. There are a lot of aspects to consider, like if you’d be better off buying a new car or a used vehicle. While there are benefits to both new and used cars, there are also reasons to consider one over the other, depending on your situation. New cars are always more expensive than a used model, but most people need to secure financing regardless of if they go with a new versus a used vehicle.

When looking at financing options for a new vehicle versus a used car, you’ll probably notice that they aren’t created equally. In many cases, there are some better financing options when you go with a new car since they have the support of the manufacturer, which often provides incentives and deals for those financing a new car. So, while the overall loan amount might be more for a new car, there is the chance that your interest rate will be lower.

Financing a used vehicle

On the other hand, used vehicles don’t cost nearly as much as a new model, but they don’t have the same special pricing options. As such, your used car loan might have higher APRs, but the lower price might mean that the overall term of your repayment is shorter. A used vehicle is also going to depreciate at a slower rate than a new car, which loses about 20{e443ec709150c73baf180d3d8e0a41d703fa022f47b2bb5516b57735b7c7f19e} of its value in the first year of ownership.

Regardless of if you choose a new or used vehicle, your financing will likely be determined by your credit score. Drivers who have a poor credit score are generally better off financing a used vehicle instead of a new one. If your credit score is in bad shape, visit OkCarz, where you can qualify for pre-approval, even with a bad credit score. Go online to learn more about how OkCarz is able to help you find vehicle financing, or to view the used vehicle inventory.