At Simply Autos, we are dedicated to helping car buyers find the best used cars in the southwestern United States. When looking for a used car, it’s important for buyers to be educated not only about possible automobile purchases, but also the financing process.
When looking for used cars for sale in Las Vegas, it is important to understand how financing differs between new and used automobiles.
What Affects Used Car Interest Rates
One of the first things automobile buyers will encounter when financing a used car is that they have a higher interest rate then a new car. There are many reasons for this.
Used cars have harder to predict resale values when compared to new cars due to potentially having multiple owners. With depreciation being more unpredictable, banks up the interest rate to make more money on the loan just in case a used car buyer replaces the car quickly.
Many car manufacturers own financing companies and one of the perks of buying new is that these companies offer a lower overall interest rate on a car loan they are personally financing. Also as with many loans, new account openings, and the like a buyer’s credit score is reviewed and taken into consideration.
For a buyer, they have to take this difference in interest into consideration and compare it to the money saved in new versus used and the difference in overall loan sizes. Even with higher interest rates, however, a used car can still be far less expensive than buying new.
Advantages to Buying Used Cars
There are many advantages to purchasing a used car over a new one, including:
- When buying used, an automobile shopper saves a good deal of money upfront. Many very nice cars depreciate very quickly and can lose up to 22 percent of their initial value within the first year. This allows used car buyers to buy used cars that are only a few years old and with acceptable millage for very affordable prices. As noted above, even an increase in loan interest rates while financing won’t eliminate the overall savings of buying used.
- Used cars save on insurance costs month-to-month as auto insurance for a used car costs less than for a new car. Most depreciation occurs during the first two years of a car’s ownership. When buying used depreciation occurs as well, however the car retains more of its initial purchase value versus buying new.
- Car loans tend to last a long time. According to Edmunds, “In 2014, 62 percent of the auto loans were for terms over 60 months.” With the lower overall cost of used cars, a buyer may be able to negotiate a shorter loan or have far lower overall monthly payments on a longer loan when compared to buying new.
- Lastly, a used car allows buyers to be a bit more adventurous with their car shopping. Used luxury cars costing as much as new entry level automobiles are not uncommon.
As the above information shows, financing a used car offers excellent value for the money. By doing proper research and buying used, a car buyer saves money on upfront investment, has lower overall insurance costs, can have a lower/shorter monthly car payment, avoids the most severe examples of depreciation, and can buy a more luxurious older car model with the same upfront cost as a new non-luxury automobile.
When looking for Las Vegas used cars for sale, contact Simply Autos for the best prices on the best used cars available.