Getting the Best Used Car Loans Can Be Easy

The best used car loan will not be the same as the best new car loan. Used car loans are different because they have different factors they use to determine loan terms. For example, the valuation of the vehicle and the length of the loan become just as important as the interest rate and other loan terms. Once you understand the pitfalls of used car loans, you can learn to avoid them in order to get the best loan possible.

Avoid Under-Valuation

Your lender may seek to independently verify the value of the used car you are purchasing to determine your loan amount. This is a routine practice, but you should know they may under-value your car compared to the sticker price the dealer is offering. You may try to negotiate with the dealer for a lower price. If there is a large discrepancy between the two values, you will need to verify the price on your own to ensure you are getting the best deal.

There are two primary sources to determine the value of a car. One is the Kellye Blue Book (KBB), which is a consumer pricing index. The KBB has prices on many goods, not just your automobile, and is frequently used by banks and other lenders. The National Auto Dealers Association (NADA) also prices cars. They base the price on the current bids at auctions across the country, and this price is more likely to be used by your dealer. You should look into both prices before discussing costs with your lender and dealer.

Avoid Long-Term Loans

Long term loans on used car will end up stripping you of money without any real return on investment. The point of purchasing a car through a financing option instead of leasing a car is to build equity in an asset. When the loan is paid off, you should have an asset with some degree of value to help you in future purchases and build your overall net worth. You will end up spending more on any vehicle than you get back in equity, because cars lose value over time.

This loss is exacerbated with a used car loan. After 100,000 miles, a car's value begins to decline very sharply. A very long car loan can mean you have a relatively worthless asset at the end of your financing. Keeping your used car loan short is a better option.

Seek Non-Recourse Loans

Recourse versus non-recourse is a term many people ignore, but it is very important with a used auto loan. You should seek a non-recourse car loan on a used auto because your car will lose value very swiftly. It is likely you will be upside down on your loan, meaning you owe more than the car is worth, within a few years. Having a non-recourse loan will protect you in the worst case scenario of a loan default.

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