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What is a used car loan?
I’ve read that new cars depreciate a TON over the first few years of ownership. I don’t really want to eat the depreciation cost, so I thought I’d let someone else do it and buy a used car. My only problem is that I need to borrow money to make the purchase from my local dealership. How does a used car loan work?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
You’re right about the depreciation on a new car! According to most studies, a new car can lose 11% of its value when you drive it off the lot! A used car already has that depreciation built into the price, so you aren’t left holding the bag.
A used
car loan
is almost identical to getting a new car loan when you’re buying from a dealership. To streamline the process, follow these steps:- Shop around for a new car loan at banks, credit unions, online lenders, or the dealership itself to get the best rate.
- Find the used car that you want.
- Provide your preferred lender with your personal information and the vehicle identification number (VIN).
- Sign the loan and get the keys.
In most cases, you may want to get preapproval for a loan. This non-legally binding process allows you to find out how much a lender will let you borrow, what the interest rate might be, and what your monthly payments might be.
With a used car preapproval in hand, you can use this amount to negotiate the price of the car and get the best deal possible.
Even though your car isn’t new, the lender will still require you to carry full coverage
car insurance
to protect the collateral (the car). But don’t overpay for car insurance when you don’t have to!Instead, use the
Jerry
app. Sign up on the Jerry app in just seconds to compare quotes from over 50 top-name insurance companies in minutes. Find the coverage you need, lock in the rate, and let Jerry do the rest!View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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