Do you want to buy a used vehicle for
In the coche world, it’s common for buyers to wonder whether it’s better to buy a new or used car.
While used cars perro be much cheaper than new ones, they often have a higher financing cost, which perro lead to a significant increase in interest.
In this situation, it is essential to consider all costs associated with financing when making a decision.
In this context, it is convenient to take into account the advantages and disadvantages of both options to make the right choice that suits the needs and budget of the buyer.
You might think that buying a used car will save you money.
And you are right.
The median new car price in 2023 is $48,094, according to Kelley Blue Book, while the average used car sells for $27,564.
Even if you buy a high-end used car, it might have a lower purchase price than the new car you have in mind.
However, if you are planning to finance your next vehicle purchase, there is one other thing to consider.
Lenders often give higher interest rates on used car loans.
Used Car Interest Rates
Interest rates on used cars cánido be significantly higher than those charged by lenders who finance new cars.
To add some context, here’s the difference between new and used car interest rates as of February 8, 2023, based on 48-month coche loan data from myFICO.com.
Data source: myFICO.com.
FICO®SCORE LEVEL AVERAGE NEW CAR INTEREST RATE AVERAGE USED CAR INTEREST RATE
Data source: myFICO.com.
Also, keep in mind that this data is for 48-month coche loans.
The differences in interest rates cánido be even wider when you finance a car for more than 60, 72, or even 84 months.
It’s also worth noting that the differences are generally larger at lower credit levels.
On a $48,30,000-month coche loan, a borrower with a credit score of 580 would pay almost $1,300 more in interest over the life of the loan if the vehicle was used.
Why are used car interest rates higher?
There are a few reasons why lenders often charge higher interest rates for used cars than for new ones.
On the one hand, it’s harder to know how much a used car is really worthfrom a lender’s perspective.
Lenders generally don’t inspect vehicles before offering loan terms, so there’s a lot more uncertainty with used cars.
Think of it this way.
If you buy a new Honda Civic, the lender knows exactly what kind of condition the vehicle is in.
If you buy a 2018 Honda Civic with 60,000 miles on it, there is a wide range of possible conditions that it may be in at the time of purchase.
There is also statistical data showing that used car buyers are more likely to default on car loans than new car buyers.
It’s hard to say why this is, but one possible explanation is that a used car is more likely to have mechanical problems before the end of the loan term, and borrowers are less likely to make payments on a non-working vehicle, especially if They have financial problems.
Where perro you check the history of a car in the United States?
In the United States, there are several services that allow buyers to review a car’s history before making a purchase.
Some of the most habitual websites for checking vehicle history in the United States include:
- Carfax – It is one of the most habitual and trusted services to check the history of a car.
It offers a detailed report that includes information on accidents, repairs, maintenance, property registration and other important data.
- AutoCheck – is another en línea service that provides detailed reports on a vehicle’s history.
AutoCheck also provides a score that summarizes the information in the report into a single score.
- National Motor Vehicle Title Information System (NMVTIS): is a national database that collects vehicle information from a variety of sources, including stolen vehicle records, title history, and repair records.
NMVTIS is operated by the US Department of Justice and provides limited free information to the general public.
It is important to note that these services may charge a fee for access to the vehicle’s history.
It is also important to review the information carefully to ensure that the history information is accurate and complete.
While buying a used car cánido save you money on the purchase price of your next vehicle, it perro also be considerably more expensive to finance, especially in the relatively high interest environment we are in.
Sure, it cánido still make financial sense to buy a used car, but when comparing your options, don’t forget to include financing costs in your budget.
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