Before you head to the used car dealership, it's important that you consider how you're going to finance your vehicle. If you need a loan, make sure you understand exactly what your options are and what factors will determine your rates. Here's a quick guide to some common questions about auto financing, especially when it comes to buying used cars for sale.
Can I get a bank loan on any used car?
Many people are surprised to find out that the answer to this question is "No." Most banks will not give loans for cars more than four or five years old. However, you might still be able to work out a payment plan with the used car dealers themselves.
What factors will determine my loan rate?
There are many variables that can affect plans, including your credit score, your down payment, your length of contract, and, of course, the cost and quality of the car itself.
What's an APR?
APR stands for "annual percentage rate." It's the amount of interest that you will pay for every year of your loan. Remember that this rate can also be negotiable with your pre-owned dealership, especially if you have strong credit or a high down payment prepared.
How much can I afford to spend on monthly car payments?
This is different for everybody, but the general rule of thumb is not to spend more than 20% of your monthly income on car costs. That includes maintenance, too, so try to plan a budget that keeps you running as smoothly as possible.
What if I want to use my car for business?
When you're purchasing a car for business, whether it's a customer service truck or a driver vehicle for a ride-sharing program like Uber, you'll probably want a business loan rather than a personal auto loan. This is subject to different kinds of underwriting than your typical car loan, so be sure to apply for the right kind.