5 Tips for Financing a Used Car

You’ve been searching for the perfect car and finally found a used one that fits your style and your budget. But now you have to pay for it. When it comes to financing, used cars often have higher interest rates than new cars, but you can still save money if you know how to get the most out of a financing plan. Get ahead of the game with these tips for financing used cars.

Know Your Credit Score

Before you even start car shopping, look at your credit. You can still get a loan if you don’t have excellent credit, but it will cost you more. If there are some things you can do to get pesky bumps off your credit report, take care of them before you apply for a loan.
You can easily get a look at your credit by requesting a report from Experian or Equifax. The good news is it free.

Get Quotes from More Than One Lender

Don’t settle for the first quote you get. Shop around and find the best rates. Shopping for a car loan is not much different than shopping for any other high-ticket item. You should compare offers from several lenders and look at the amount they will loan you, the interest rates, and the length of the loan term. Make sure you get the best deal before signing on the dotted line.

Down Payments Will Help You in the Long Run

One of the most important tips you can follow when purchasing used cars is to pay the largest down payment possible. The best scenario is putting at least 20% of the purchase price of the used car down, but even 10% will make a difference. The more money you pay upfront, the less you have to borrow. This lowers your monthly payments and decreases the amount of interest you’ll have to pay over the life of the loan.

Get the Shortest Loan Term You Can

Regardless of your credit score or the interest rate you get, the longer the term of the loan, the more you will pay. It might seem like you’re paying more with a shorter term because the monthly payments will be higher, but over the length of the loan, you will end up paying much less.

Another reason to keep used car loans short is that lenders often charge higher interest rates for longer-term loans.

Don’t Roll Fees into Your Loan.

While it might seem easier just to roll extra fees into your loan, it means you’ll end up paying interest on them. Instead, find out what the dealer charges for fees, whether it’s documentation fees, dealership fees, or sales tax. Pay all these in cash, and only borrow what you are paying for the car.

Getting a new car, even if it’s a used car, is exciting. Most of us have to finance cars and have car payments, but as long as you go in informed and with all the information, you can keep your monthly car payments to a minimum.