Used vehicle financing is a difficult thing to understand. It seems simple on the surface, but when you look at all of the factors that go into it, not to mention the many different ways that you can actually approach that, getting a loan to buy a car can be really confusing. Fortunately, there are simple ways to approach these options and find the one that is best for you.
The first and most common type of used vehicle financing is a long term auto loan. Most often these are for a period anywhere from three years (thirty six months) to seven years (eighty four months). There are a number of advantages to this sort of loan, the most prominent being that it has significantly lower payments than any other loan type due to them being spread out over a longer period. Generally, a long term loan will also be more sustainable if, for example, you lose your job and can’t make large payments any more. Unfortunately, when it comes time to trade in your car, you will find that the value has dropped significantly because of the increased time. Also, because it is out for longer, you can expect to pay a lot more in interest over the life of the loan.
For some people, a short term loan is a better fit. Used vehicle financing often makes use of short term loans, since they are more reliable than their longer term siblings. Usually a short term loan is anywhere from one year (twelve months) to three years (thirty six months) and is often used for people with lower credit. The monthly payments are higher, but the overall interest is much lower over the life of the loan, so you’re ultimately paying a lot less. This allows you to pay off your car quickly and end up with higher trade in value on it, but it can be harder to maintain in difficult circumstances with the higher monthly payment that usually comes with it.
A specific type of short term loan is a Buy Here Pay Here style of financing. With one of those, rather than go through a bank, the dealership (for example, one that sells used cars Charlotte NC) provides the loan to you and you pay them directly for it. Often this means physically coming to the dealer every month to pay, though many are opening up to online and phone-based methods of payment.
There are several choices that you have to make when buying a car, but you don’t have to make them blind nor just accept what you’re being told. Do your research and make sure you know what to ask for when it comes to used vehicle financing.