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Auto
Loan Advisor - Finance Your Used Car
Financing a
used car is a little different that financing a new car.
First, you might
buy your car from someone other than a dealer who has loan financing
companies that he works with. Even if you buy from such a dealer,
his financing may not be the best since he usually makes an extra
profit markup on the rate you pay.
Furthermore,
used cars do no enjoy the benefit of the highly competitive new-car
loan rates, such as 0% interest, offered by major car manufacturers.
This makes used-car rates much more variable than new-car rates.
Therefore it
is essential that a used-car buyer shop around for the best rates
and arrange their loan financing in advance of their purchase.
We assume you
have already done your homework, know the car you want, have read
our Used Car Buyer's Guide,
and used our Loan Payment
Calculator to make sure you can afford the payments.
Your
financing options
There are a
number of options available to used-car buyers in need of financing:
- Finance from
the dealer's loan company. We've already mentioned
that this is not always available, nor is always the best option.
- Obtain your
loan from a local bank or credit union. Although,
in past years, credit unions were one of the best sources of low
rate loans, this is not always the case anymore.
- Get a loan
from a reputable online auto loan company such
as Capital
One
or DriverLoans.com
 .
These kinds of companies are highly competitive and can offer
low rates because of the efficiencies of the online application
process (it's nearly all automated) — and you can get free
rate quotes online.
- Get a home-equity
loan, which has the extra benefit of income tax savings.
However, give careful thought before you take this approach because
if you find yourself unable to make payments, you risk losing
your home.
- Another option
that most people don't know about is that you have the option
to lease your used car, at significantly lower
payments than with a loan. For more, see our article, How
to Lease a Used Car.
- Borrow from
a friend or relative. This may turn out to be
the best option for you if you have poor or unestablished credit.
Or you might have to get a friend or relative to co-sign with
you.
About
your credit rating
Your credit
history will most definitely affect your ability to get a loan and
will affect the rate that you pay. The low rates that you see advertised
by banks, credit unions, and loan companies are those that are only
available to those with the best credit "scores." FICO
scores of 680 or higher are usually required to obtain the best
rates. People with lower scores can expect to pay higher rates,
or even be turned down, depending on just how bad the score is.
It is wise to
check your credit history for errors and problems before you ever
start shopping for a loan. This way, you'll understand why you may
not be getting great rate quotes. If you find problems, you'll have
time to repair them before your loan company looks at your report.
Save
25% on FICO Credit Complete! 
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