Since most of us don’t have enough cash on hand to pay for a car, many of us choose to pay for our cars by taking out a loan. This is true for both new and used cars. If you are debating between buying used or new, here are a few differences in the way financing will work for each type of car.
New Car Loans
Everyone wants to drive a new car. You get the joy of owning something in pristine condition and the satisfaction of knowing that you are its first and only owner. New car loans have benefits all their own, too. In general, a new car loan will have lower rates than a used car loan; however, the financing term (length of the loan) is usually longer.
New cars shoppers can often take advantage of special rates and sales events that aren’t available with used car. These rates and sales usually come through the manufacturer, like Ford, and require the buyer to finance through their financing arm (Ford Credit). Depending on the buyer’s credit, he or she could be eligible for low or zero annual percentage rates, “bonus cash,” and other incentives.
Used Car Loans
If you consider yourself more of a savvy-saver, then you likely stick with used cars. Used cars are a great way to save thousands of dollars, when compared to a new car. This is true even for cars just a few years old.
Because used cars lose their value slower than new cars, used car shoppers are less likely to default on their loan. This is when you owe more on the loan than the car is worth and could put you in a tight spot if you total the car during that time.
Even though used car loans typically have higher rates, the length of the loan is usually shorter. This means you can pay back the loan faster and end up saving more in the long run.
For more information about car loans and financing, contact us at Tropical Ford.