How do used car loans work?

My neighbor is selling their beautiful classic car. It’s my dream car. I have no idea how I’d pay for it, though. Is buying a used car with a loan different than buying a new car?

Answer
Congratulations on finding your dream car—it sounds like kismet!
Used car loans are similar to new car loans, but there are a few key differences, such as:
  • Higher interest rates
  • Shorter term length
  • Potential other restrictions
Cars depreciate quickly. So old cars are worth less than new cars. For a lender, that means used car loans are riskier.
To get a loan to buy the car of your dreams:
  • Check your credit score. It needs to be 660 or higher.
  • Put down a significant down payment. Shoot for 20% or more.
  • Try finding a cosigner. A cosigner with better credit can help your chances of getting approved and earning a reasonable interest rate.
It’s important when buying a car to make sure you have the correct car insurance. The Jerry app can help you find the perfect insurance for you and that classic car of your dreams. We’ll compare 50+ top insurance companies, like Nationwide, Allstate, Safeco, Progressive, and Travelers, so you get the coverage you need—without overpaying for it.
Lauren Smith
Answered on Nov 19, 2021
Lauren has written for World Nomads, the Matador Network, Korvia Consulting, and once upon a time Three Fates Games. She graduated from Columbia College of Chicago with a BFA in Creative Writing. After graduating, she moved overseas and lived in South Korea where she spent her free time traveling and going on road trips with friends. She misses the rest stop potatoes and is trying to figure out how to recreate them at home. She's now based outside of Chicago and when she's not writing she spends her free time reading, playing video games, and exploring whenever she can.
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