When it comes to buying a car, consumers are faced with a tough decision: new or used. While the idea of having a brand new car is appealing to many consumers, it’s often not a feasible option. Fortunately, there are plenty of dealerships who offer auto loans for subprime auto leads. But before we get into the details that actually go into how much a person pays for their car payment, let’s look at a few key differences in new and used car loans.
New Car Loans
New cars are often so appealing because they have a lower risk of having maintenance issues. Additionally, there are a few other appealing aspects of new car loans:
Lower rates
While new car rates may be lower than those of used cars, the financing periods are often normally longer. However, there may be an option to get a special rate on certain models and model-year vehicles.
Special events
Year-end and holiday sales are a regular occurrence among carmakers and dealerships. At these events, they often offer a range of incentives when a new car is purchased. These incentives may include special rates.
Used Car Loans
Used vehicles can offer many benefits as well. With their lower prices, they’re often a common purchase for subprime auto leads and others who may not be able to afford the high price new cars. Luckily, there are plenty of high-quality pre-owned vehicles on the market. Along with lower prices, there are a few additional benefits of used car loans:
Slower depreciation
Because new cars lose about 20% of their value during the first year, buying a used vehicle means the previous owner has already taken that depreciation hit. This may contribute to avoiding having to pay more than the vehicle is worth.
Shorter loan terms
While used cars can potentially have higher rates than new ones, they usually have shorter loan periods. This means the debt is paid back quicker.
What Determines a Car Payment?
No matter new or used, a monthly payment will most likely be determined by the following factors:
- Income, credit score, and debt
- Age of the car
- Length of the loan
- Size of the loan
- Amount of the down payment
- Interest rate
The decision to purchase a car is one that should not be taken lightly. While 36% of people were able to purchase a car outright, that’s not possible for everybody. Dealerships can work with a variety of buyers to ensure they get the best vehicle and loan for their financial situation.
