The short answer to this question is: Not much. At least, not from a lender’s standpoint. The process of applying for the loan will be the same. The main difference between new and used car loans is usually the amount.
However, sometimes that isn’t even true. For instance, you could probably get a new coupe for less than a used SUV in some cases. However, for the purpose of answering this question, let’s just say lenders will generally lend you more money for a new car than a used car because they cost more and are worth more.
It’s all about collateral
The only reason your lender cares which car you get is that your car acts as collateral for your loan. That is, if you default on your loan your lender can legally repossess your car. Still, whether your car is new or used is less important than how much it is worth.
Most people consider the Kelley Blue Book as a reliable source for vehicle values. If you have a particular vehicle in mind, make sure you check the Blue Book before you head to the dealer so you don’t get duped. Your lender will likely use this book as a resource for determining whether they’re willing to lend you a certain amount for a car.
Will it affect my interest rate?
Whether you are getting a loan for a new or used car does not affect your interest rate or the term of your loan. Your credit rating and the amount you are borrowing have the biggest effect on your interest rate.
Of course, another factor that will affect your interest rate is who you are borrowing from. If you get your financing through a car dealer, you’ll likely end up paying a higher interest rate. Different lending institutions will offer different interest rates.
Car dealers generally get loan offers for you from several lenders. Then, they offer you the one that will get the dealer the highest commission, which is usually the one with the highest interest rate. However, if you get an online loan through Car Deal Expert, you can get the lowest interest rate available to you.
The difference between big and small loans
Lenders are just as willing to give out loans for used vehicles as they are for new vehicles. The biggest factor in deciding how much money you can borrow is your credit score. Your income and employment history also affect how much you will be approved to borrow.
The type of car you are buying, whether new or used, big or small, only factors in at the end of the loan process. If lenders see that you are trying to borrow way too much money for a certain car, they’ll let you know. However, as long as your dealer is giving you a reasonable price for the vehicle and that price falls within your pre-approval agreement with your lender, the car won’t change your lender’s mind about your loan.[apply_button]