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?"

Answer provided by
Eric Schad
Answered on May 28, 2021
“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.”

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