When you want to buy a car, say a Volvo for instance, but you do not have the cash, stop looking at catalogues that display pictures of svelte brand new cars. Instead, you can secure a used auto loan to buy a used car that costs 50% less than a brand new one.
Buying a used Volvo can be a wise move, because if you are thinking of getting a used auto loan, you can get lower interest rates due to the depreciation of the car. As compared to brand new cars that lose its value by 15-16% every year, the value of second hand cars is more consistent. However, first you need to know what type of used car loan you can apply for.
Types of Used Car Loans
• Purchasing from a used car dealer. The banks easily grant car loan if the borrower is directly buying from a dealer whether it is a used car department, a used car dealership, or a car dealership that sells both brand new and previously owned cars like Mill Volvo car dealers. Banks find this kind of transaction less risky for them thus they provide the borrower with more financing options.
• Buying from a private entity. It is usually difficult to obtain a used car loan for this type of deal because the bank or financing agency finds it more risky. In case the car loan is approved, higher interest rate is involved due to uncertainties in this kind of transaction.
At times, borrowers may find it difficult to secure a used auto loan because not all banks are willing to lend money to buy a car that has been in used for more than five years. Usually, the interest rate is pegged at least 2% higher than the rates given for brand new car loans. If you are already decided on getting yourself a loan so you can buy the car, here are some things you need to do before going to the bank:
- Make sure that the car you plan to purchase has undergone a complete checkup. You do not want to go through the process of securing a loan and paying it only to end up with something that may not outlive the loan. Always perform a test drive and make a thorough inspection before making a deal. This step is very important especially if you are buying from a private party which, unlike in a dealership, does not usually have a warranty clause for the deal. If you are buying from a car dealer, ask for an extended warranty with low rate.
- Check your credit report to find out if you are qualified to apply for a car loan with the bank. Know your credit standing before you apply for a used car loan. Inquire from different banks and financing agencies what car loan packages are available and what other options are offered. Interest rates are different among banks but generally, the basis for approving your loan falls on your credit rating.
Now you are ready to go to the bank and fill out the loan application. The initial step that the bank does is to determine the value of the car. Usually, the loan cannot be higher than the assessed value as determined by the bank. Thus if the car is priced more than the loan value, the borrower can either shoulder the price difference or find a cheaper car that fits the bank loan.
Buying a car, whether it is brand new or second-hand, can be likened to a roller coaster of emotions. The buyer feels the excitement of getting to choose the car he wants only to become disappointed later because of the entailing costs attached with the car. Despite this, that glimpse of hope remains because thankfully there is the used auto loan that offers reasonable financing schemes to enable him to buy what is truly affordable.