What is a Good Used Car Loan Rate?
Securing a good used car loan rate has suddenly become much easier. The restructuring of the American auto companies has placed used car dealers into a very competitive situation. The sales and reduction of inventory is critical to their survival.
In the past, the general rule of thumb was not to use their offer to finance unless it was absolutely necessary. Historically, dealers would inquire by finding out what kind of payment you required. Then, the pitch would be tailored around your requirements and mostly likely at a high interest rate. Today, you are at a greater advantage. Prior planning will help you secure a good used car loan rate.
Firstly, you should go to a credit union or local bank. Credit unions typically offer rates between 5-5.5%. A good loan rate should never exceed 5.5% provided that you have a good credit rating. It pays to shop around in your local market first. You may find banks and credit unions offering incentives to secure new customers. Low interest car loans are typical enticements. There are several online lenders that offer comparative low interest rates. The more pre-approvals that you receive the better position you are in to negotiate with other lenders. Overall, in today's market, with good credit, good used car interest rates range between 5-6.5%. If you work hard enough, you may even be able to persuade a lender to grant your used car loan at 4.5%.
Assuming that you are creditworthy, it is likely that you will be granted a loan rate within the range stated above. However, be aware of other factors that can affect your loan rate. The length of the term of your loan and the year of the vehicle can make a significant impact. It is not uncommon for interest rates to be higher on older cars financed for extended periods. Keep in mind that loan rates can fluctuate very frequently. In addition, regionally, rates can vary based on the economic conditions of various markets. Staying on top of these rates through online sources is critical to securing a low interest rate.
If you are in the market for a used car it is best to shop around for competitive interest rates. Typically, credit standards are fairly high and you will need to prove that you are in good standing. You may find a great deal and a great price on a used car. However, if your credit is not in good shape, you may be considered a risk to the lender. A negative credit report will always translate into higher used car loan interest rates. Under certain credit conditions, used car loan interest rates can be extreme.