Arranging a new car loan is easier than financing the purchase of a used car because there is a more concrete valuation on a new car versus an old car.
If the lender cannot determine the actual cash value of the vehicle, it is very difficult for that lender to mitigate the risk of the loan.
Is it easier to get a new or used car loan with bad credit?
With good credit, you would qualify for a rate at or below average. With bad credit, you’ll typically have a higher interest rate, but be skeptical of any loan rate more than double the average. Your loan rate will affect not only your monthly payment but also the price tag of the car you can purchase.
Is it easier to buy a new car or used car?
While nearly everything about used cars costs less, buying a new car has its advantages. Also, it’s easier to figure out what you should pay for a new car, even if the negotiation process is still a pain. Automakers offer attractive car-buying incentives and new car loans have better interest rates.
Why are new car loans cheaper than used?
Credit scores are another reason why new cars have lower rates than used ones. But generally it’s true, which is why lenders tend to offer higher rates on used cars. After all, a lower risk of repossession means lower interest rates — and the risk of repossession is much lower with new cars.
Photo in the article by “Energy.gov”