One common question for most car buyers is whether they should buy a preowned or new car. Weighing the advantages and disadvantages of both can go a long way in helping you make the right decisions. No doubts, they both have their advantages and disadvantages. We will consider the advantages and disadvantages of buying a new car with auto financing.
Advantages of Buying a New Car
Lower APR and Interest Rates: The auto loan interest rate and APR when you buy a new car is lower compared to when you buy a used car but the financing period may be longer.
Bonus Cash: There are money off from the manufacturer on new cars just to serve as an incentive for car shoppers.
Special Rates: Auto manufacturers usually offer incentives like low or zero APRs on certain models. These rates are usually not negotiable and are dependent on the consumer’s credit history and some other requirements. However, if there are no special rates, then the rates become generally negotiable for both used and new cars. Special rate and bonus cash are not offered at the same time.
Sales Events: There are certain periods of the year where there are discounted prices, loans and incentives. Watch out for holiday sales events and year end events when carmakers are likely to slash prices. One of such time to be on the lookout is Black Friday through the new year.
Advantages of Used Car Loans
Smaller Loan Amounts: Used cars are not as costly as new car and as such when you apply for a used car loans, the loan amount will not be much.
Shorter Loan Terms: Since the money needed to buy a used car won’t be much, then the loan term is usually short although this may attract a higher APR and interest rate than what a new car will attract.
Slower Depreciation: New cars depreciate faster in their first year and as a result of this, buying a preowned car looks more like a bargain economic-wise and this is why most people prefer to buy a used car. Buying a used car can help to guide against having a negative equity.
Available for all Credit Types: All credit types can qualify to get a loan for a used car. On the other hand, only people with good credit are likely to get approved for a loan to buy a new car.
Above all, knowing what is best for you in terms of the needs you want your car to serve, your budget, and income should form the basis of whether you will go shopping for a new or used car. You can use an auto loan calculator to help you make informed decision.
If you are making a down payment or if you have a car to trade-in, input the values and see how it changes so that you can have an idea of the loan duration and the amount to be paid monthly. This will help you to make the right decision.