Used car loan: how to get the best deal?
October 27, 2019
When you know that more than one vehicle in two is the subject of a car loan, one can well imagine that the second-hand car loan is a must. Because if the LOA is exploding (although it generally costs more than credit) on the new, the used car loan remains the safe bet in the case of second-hand financing. You still have to make sure you get the best rate.
How to choose a used car loan?
To get the best used car loan rate, there are a few must-haves to follow. Indeed, the car loan rate is influenced by several factors:
- Age of the car
- Type of used car loan : revolving, repayable credit allocated to sales or not allocated
- Duration and amount borrowed
- Auto loan distributor: bank, credit organization or dealer
To ensure that you get the best car loan, we have set up a comparator of the largest financial companies combined with an additional negotiation method if it turns out to be necessary.
Used car loan: the influence of age
The age of the used vehicle is one of the most determining factors in the car loan rate. Most financial companies differentiate between used vehicles less than 2 years old and those more than 2 years old. The used car loan rates of less than 2 years will be the same as those offered for a used car loan.
Why the difference in rates? In the event of a repayment problem on a new or very recent car loan, financial companies know that they can request the vehicle to be seized. They will thus be able to recover part of the unpaid debt. This is not the case for used cars that are too old.
The difference in rate is not negligible. If we take the example for a credit amount of 10,000 USD over 48 months and compare the best fixed taeg rates, this is what we get:
Best used car loan + 2 years: 2.85% monthly payment: $ 220.52 credit cost: $ 584.96
Best new car loan or -2 years: 2.40% monthly payment: $ 218.59 credit cost: 492.32 $
NB : the fixed taeg rate is the legal reference rate which includes all the costs of a used car loan. This rate does not include the cost of optional insurance for which we invite to be particularly vigilant.
Used car loan: the type of loan
So that the subject is not too technical we will simplify the approach, that the credit purists do not rebel. To finance the purchase of a used vehicle, there are 3 main types of used car credit:
- Revolving credit
- Depreciable loan allocated
- Unallocated amortizable loan
Revolving credit, known for a long time as revolving credit, can be used to finance the purchase of a used vehicle. Indeed, and despite what one might think, for small amounts, revolving credit is generally less expensive than the amortizable loan. Indeed, it does not interest too much the car loan organizations occasion to make amortizable loans for small amounts which will produce a lot of paperwork and tasks to be carried out for a single use. The revolving credit being reusable, they bet on the long term with the customer in the hope that the credit is reused, and therefore regularly offer attractive offers.
Two other additional advantages of this type of second-hand car loan: 1) the credit organizations accept more files; 2) prepayments can be made free of charge at any time.
This is the type of loan that is recommended for any second-hand car loan of less than 4000 USD.
Depreciable credit allocated
An assigned depreciable credit is a loan the purpose of which is to finance a specific asset. The designation of this property is an integral part of the contractualization of the credit. The credit must only be used to finance this property, it is a contractual commitment. Unlike revolving credit, depreciable credit has a fixed rate.
In our case, the commitment is to obtain a used car loan. To get used car credit money, you have to buy a used car. This is the type of credit generally offered for new auto loans or less than 2 years.
The rates of these assigned depreciable credits are generally the lowest. To be able to obtain them, you will need to provide proof of purchase of the vehicle, such as an order form or a photocopy of the car’s registration card. If the sale does not take place, the credit is canceled without costing the borrower anything.
Used car credit therefore generally does not pass this type of loan.
Unallocated depreciable credit
It is the most used type of loan for used car credit. Indeed, the vast majority of used car sales are made from individual to individual.
To obtain this used car loan, you will not be asked for proof of purchase of the car. It is not only practical when it is not possible to obtain proof but also and especially if you plan to finance in addition a good overhaul or some repairs on the car.
Compare used car credit: duration and amount
Why do we think it is important to compare used car loan rates? We can see from day to day that the rates vary regularly. Do not trust a particular organization. The best demonstration is to go through an example.
The average amount of the purchase of a used vehicle is 14,000 USD. Take the hypothesis of a contribution or a recovery of 4000 USD. The average amount of a second-hand car loan is therefore 10,000 USD. For the purchase of a vehicle over 2 years old over 60 years, here is the comparison:
The cheapest fixed taeg rate: 3.70% monthly payment: 182.54 USD cost of credit: 952.40 USD
The most expensive fixed taeg rate: 6.63% monthly payment: 195.36 USD cost of credit: 1721.60 USD
For exactly the same amount of used car credit, we are left with a spread of around 800 USD.
That is why it seems essential to us to compare before committing. In addition, our used car credit comparator offers an automatic non-binding assessment of the organization offering the cheapest rate. This system allows you to really know what is the best acceptable rate for each file.
Where to take your used car loan?
Generally, to obtain a second-hand car loan, you can turn either to a specialized organization such as Bankate or Franfinance, or to your bank or to a car dealer.
Generally, used car credit is more expensive in dealerships and in banks than that of online credit organizations. In the concessions it is rather because it is necessary to remunerate one more intermediary (the concessionaire) and in the banks it is rather that the car loan is difficult to obtain if one is not a good historical customer…
However, whatever the situation, we offer a method of negotiating car credit that seems unstoppable:
- Getting the best rate from major credit organizations
It’s very simple, just use our credit comparator which will allow you to get the best custom car credit rate for each file. All for free and without obligation.
- Receive / Print the proposal
The specialized organization offering the best rate will send a prior credit offer by post. It is also possible to receive it by email or to print it following the email confirming the agreement in principle that will be sent.
- Make an appointment at a bank or a concession
Ask your advisor or the sales representative to make the proposal for the best possible rate. Be careful to ask for the same duration and the same amount.
- Negotiate the best rate
Either the rate you are offered is better than the one you received. Or you can take out the offer you received and ask to do better. If this is not possible, you already have the best offer in your hands.
Reminder: auto credit allows you to retract for 14 days, according to the law of consumer credit.