Different Ways to Finance a Used Car
Financing a used car is a lot harder than it sounds. Even though used cars are typically a lot cheaper than new cars, good used cars are still quite an expense. Looking for a used car on a budget isn’t the best way to go about buying one, either. Doing that means giving up on buying a used car of your choice, and often means you have to deal with a poorer-quality vehicle. However, getting a loan can be a big deal. Bank loans can take weeks, which many car buyers do not have.
Before buying or financing a used car, consider your circumstances. Can you make a relatively large down payment? Or are you on a tight budget with not much time on your hands? Your situation will help you determine the best way to finance your next ride.
Here are some of the most popular ways to finance a used car.
Take Out A Personal Loan With A Friend of Relative
Asking a friend for a favor is never easy. Asking them for a large sum of money is especially not fun.
However, some people opt to go the personal loan route when it comes to financing a used car. It’s not always a huge issue, especially if you and your loved one have a good relationship. Many people sweeten the deal by offering the person giving the loan an interest rate on their loan.
If you were to finance through a bank, you would be given a loan with an interest rate - sometimes as much as 20+ percent. A friend or a family member might lend you the amount you need to purchase a car if you offer to pay it back with low interest. This would allow them to make a little money (sometimes more than they might get on interest from their savings account) and would give you a better rate on a loan.
Sell An Old Car Or Two
If you have an old car in working condition, this is another good way to get some of the money you might need to finance a used car. Any vehicle can get some trade-in money, but the quality and condition of the vehicle will make all the difference.
Junker cars are great for selling for scrap metal. Scrap metal sells will only get you a few hundred dollars, which might be enough for a down payment on a used car. Newer used vehicles will sell for a bit more. Make sure to check the Kelly Blue Book to see the value of your vehicle to get the best rate.
Unfortunately, neither of these scenarios will usually get you enough money for a full car payment. However, they are both enough to get you a down payment on a car at a dealership that offers in-house financing.
Take Out A Bank Loan
Bank loans are another popular option for those hoping to finance a used car. Usually, this financing option is most often used by those wishing to buy a car from a private seller on a second hand sales platform. This might include places like Facebook Marketplace, Craigslist, or phone apps like LegGo.
On these platforms, non-dealer sellers generally expect full payment on their car. This even goes for newer cars selling for many thousands of dollars. Many people looking for used vehicles on platforms like these can’t afford a full payment like this. Yet, there are very few private sellers who will allow car payments for the people buying their cars. Going to a bank and getting a loan through a bank will enable you to pay the seller in full while also affording you the option of making payments on a car.
The one problem with bank loans is credit. Banks lend based on credit, which isn’t the same for everyone. If you have a lower credit score or any issue with your past credit, banks might not lend to you. But you shouldn’t feel down if you have been denied a bank loan. There are still other lending options available.
Finance In-House With A New Car Dealership
Lots of car buyers avoid new car dealerships because they feel like it isn’t a good option for them. Modern cars can be incredibly pricey, and even with trade-in and financing deals, monthly payments can be out of reach for certain car shoppers.
However, because of trade-in deals with people hoping for a newer car, most new car dealerships also carry used vehicles at reasonable prices. If this is of interest to you (perhaps if you’ve worked with the dealership before), ask them about the used cars on their lot.
A downside to working with new car dealerships is that they will sometimes try to sell you more modern cars. This is because many of their salespeople work on commission. If you go this route, be sure to specify you are only interested in used vehicles before you start viewing cars on their lot.
Finance With A Buy Here Pay Here Dealership
Buy here pay here dealerships are the most straightforward and most accessible means in which to finance a used car because they are built on financing to people from all ends of the financial spectrum. Their in-house financing allows you to shop for a car and finance a vehicle all in one sitting. Their loans are personalized, working with your debt-to-income ratio as well as your down payment amount to come up with a rate that works for you.
Additionally, buy here pay here dealerships like Autobank have the same perks as a new dealership. You can get great deals on trade-ins, and competitive interest rates on loans. Although many of the previously mentioned financing options will work for specific buyers, buy here pay here dealerships work for all car buyers.
AutoBank has one of the biggest selection of used cars for affordable prices in the greater Kansas City area. Our competitive rates, great selection of used vehicles, and friendly staff are only some of the reasons why our customers return to us over and over again. Click here to apply for financing or to browse our selection of used cars.