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BY KEVIN SAWYER – Getting the financing in place that you need to purchase that used vehicle can sometimes be a tricky thing. They are not like conventional car loans which tend to be stable over time with reasonable interest rates. That’s because of depreciation. Used vehicles depreciate differently so that’s why used car financing tends to cost more in interest. However, there are some things you need to know before you accept any financing deal.

  • The lenders don’t want the risk so the rates are going to be rather higher than a new car loan. With a used car loan, try and focus more on time than on the payment. Get the loan for as short a period of time as you can. Most tend to be long and drawn out and when you realize what you paid for the car, you could have almost bought a new one. The big key to it all is that your car will be worth less the longer you own it so you have an asset whose worth will never be recoverable.
  • Take your time and do some due diligence with regard to seeing what several different lenders have to offer. Credit unions are well known for offering solid sources of financing and they generally offer more options than anyone else.
  • Once you have what you believe to be a reasonable offer from someone, you now have some leverage to use against the dealers. Try to avoid being financed by a used car dealership. The rates will be high and they may not even be reporting the loan to any of the credit bureaus which, of course, doesn’t help you.
  • Approach your used car dealer with the financing you already have in place. Make a deal to the affect that maybe you buy from them if they can do better than the financing you already have.
  • Finally, there are the dealers who advertise that you buy here, you pay here. These you need to be very careful with. They are less interested in selling you a vehicle and more interested in getting the financing in place. That’s where they are making their money. Their margins are slim on the cars but huge on the loans. Almost as bad as the payday loan places can be. If they make the loan sound just too good to be true, be on the lookout and read the fine print. There could be a huge balloon payment due at the end.

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