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Why are interest rates higher for used car loans?
I want to buy a luxury used car, but I was shocked about the interest loan rates? Why are the rates higher for used cars than new cars?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Buying a used car
is a smart move. You get the comfort and reliability of a solid car without the depreciation and high price tag.Used
car loans
are often more expensive because of the car’s depreciation, the lower value, and the higher potential for mechanical problems. Add these all together, and a car loan for a used vehicle is a higher risk. That’s why a used car loan has a higher interest rate.However, you aren’t hit for the 10% to 20% depreciation that happens when you drive a new car off the lot. In many ways, it’s a financially savvy move that can bring great value.
Remember that you’ll need full coverage car insurance for your vehicle. You’ve already saved money by buying a used vehicle, so you may as well keep your savings going and shop around for car insurance.
That’s when
Jerry
can help. Sign up in just minutes to compare rates for your car and get the best value possible. What you do with the extra savings is up to you.View full answer
- Gregory R.
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