A new car loan could be more affordable than buying used

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Photo of some cars

New cars can be worth more in value. CC by quinn.anya/Flickr

As the auto industry undergoes a profound transformation, new cars may be a better investment than pre-owned vehicles. Low interest and no interest financing for new cars is creating an unusual auto loan environment. Classic assumptions about new versus used cars aren’t always correct. Depending on the make and model, there are some vehicles that actually cost less over time when bought new rather than used.

Offers of free financing from auto lenders

If a buyer isn’t paying for a vehicle in cash, it might be a better idea to get a loan for a new car than a used one right now. There are very low no credit check loan rates for new vehicles because of the interest rates from the recession and fewer employed folks enjoying a regular payday. According to Edmunds.com, the average rate for an auto loan was a mere 4.16 percent in December. Strangely enough, more than 15 percent of auto loans are virtually devoid of interest. After the government bailout, General Motors is now doing well. In fact, of all the auto loans offered by the company, 50 percent of them have 0 percent financing. Not everyone can get 0 percent financing though. It is necessary to have really good credit. That means at least a 650 and usually 700 FICO score is required.

How you can get a new car that costs less than a used car

While average interest rates for new car loans are about 4 percent, rates for used cars are still about 8 percent. The price gap between new and used cars isn’t much, either. It has gotten smaller. About 700,000 used cars were taken out of the system in 2009 with the “cash for clunkers” program. The financial crisis and credit crunch that hit new car sales so hard affected the amount of used cars being traded in. With such cheap deals on five-year loans for new cars, a one-year-old vehicle is often going to be more expensive than a new model.

Which new cars are cheaper than used cars?

Edmunds.com compared the 7.7 percent interest rate of used cars with the 0 percent interest rate on new cars to make a list of new cars cheaper than used cars. Some of the vehicles on the list include the Audi S4 Premium Plus Quattro Sedan, with a savings of $1,020; the Honda CR-V EX with a savings of $1,320; and the Toyota FJ Cruiser base model, also with a savings of $1,320.


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