Is the interest on a used car loan always higher than on a new car loan?

"I'm debating whether to finance a new or a used car. I've noticed that anywhere I shop, the lender offers a higher rate for used cars than for new ones.

Is this a common practice?"

“The idea is relatively simple. The lender never sees the car and doesn’t do any mechanical checks on it.
A used car might have mechanical defects—plus the car’s already taken a hit on depreciation. To counteract the risk, lenders typically offer a higher interest rate.
For a new car, they know that the vehicle is in mint condition. There’s little risk of mechanical failure, making their collateral (the vehicle) worth more. Therefore, lenders can offer a lower rate.”
Eric Schad
Answered on May 28, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.

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