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Compare car loans for used cars

Financing options to get behind the wheel of a new-to-you ride.

New cars are notorious for losing their value the moment you drive them off the lot — but you can take advantage of that depreciation by buying used. It can help you save money, and there are still plenty of loan options available. However, you'll want to carefully consider the vehicle's history before you buy.
Name Product Filter Values Minimum credit score APR Loan term Requirements
PenFed Auto Loans
Starting at 5.19%
3 to 7 years
Active membership with PenFed
One of the largest national credit unions in the U.S., it offers new and used auto financing with transparent low rates.
Varies depending on the lender
3 to 6 years
Varies depending on the lender
No minimum credit score
3.9% to 27.9%
1 to 6 years
18+ years old, annual income of $4,000+, no active bankruptcies
Get pre-qualified for used car financing and receive competitive, personalized rates.

3 ways to finance a used car

While there are a variety of ways to finance a used car, these are the three most common methods:

  1. Secured car loans. Most car loans use your car as collateral to secure the loan. This can help you qualify for a competitive rate, but you risk losing your car if you default.
  2. Dealership financing. Nearly every dealership you walk into will offer in-house or third-party financing to assist you in buying a car. These are typically also secured car loans, but often have less-strict credit requirements than you may find with other lenders.
  3. Unsecured personal loans. Customers with good credit are generally offered unsecured personal loans. These loans don’t require you to use your car as collateral but can result in higher interest rates and additional fees.

Is dealership financing worth it?

It can be, but you should still take the time to compare loans from banks and online lenders first. Dealership financing can be quick, but it’s often more expensive than finding financing through a third-party lender. Keep these points in mind when deciding whether or not you want to use dealership financing for your used car purchase:

  • Interest rate. Dealerships generally advertise low interest rates to get you in the door. But these are typically reserved for buyers with excellent credit. Getting preapproved at a few third-party lenders first can give you bargaining power when you hit the dealership.
  • Down payment. While dealerships or lenders don’t necessarily require a down payment, it can help reduce the cost of your loan. When you’re buying a used car, try to have a down payment of 10% to 20% of the car saved up — it can help you save big on interest.
  • Car price. Consider the overall price of your car. If dealership financing can help you score a lower interest rate, you still have room for negotiation. Walking in with a preapproved car loan offer already in hand can help give you an edge.
  • Extras. Extras like an extended warranty and additional insurance can impact your final loan amount, making it more expensive. Consider these carefully, and remember: No dealership or loan company can force you to take on optional features.

What are the limits on used car loans?

Lenders typically set minimum and maximum loan amounts, as well as limits to the age of the vehicle and how many miles it can have. Here’s what you can expect from some top car loan providers.

Loan providerMaximum age of carMinimum loan amountMaximum loan amount
Auto Credit ExpressNoneVariesVaries
car.Loan.comVaries by lenderVaries by lenderVaries by lender
myAutoloan.com10 years old$100,000
LendingTreeVaries by lenderVaries by lenderVaries by lender
CarsDirectVaries by lenderVaries by lenderVaries by lender
Springboardauto8 years old
Bluesky Auto Finance8 years oldN/A$30,000

Should I put down a deposit on a used car?

Some lenders might request a deposit if:

  • You don’t have financing available after you negotiate the purchase price.
  • The dealership needs to order your vehicle from a factory.
  • The dealership needs to exchange vehicles with another dealership.

In these cases, it may be necessary to leave a deposit for your used car, but that doesn’t mean you have to settle for the dealer’s terms. Every step of a car purchase can be negotiated, and that includes your deposit.

Tips for making a deposit on a used car

Keep these pointers in mind before leaving a deposit on a used car:

  • Ensure it’s refundable. Read the terms of your contract carefully and have a sales manager change it if you find that it’s nonrefundable. That way you can back out if the car doesn’t meet your standards after you have it inspected.
  • Ensure it’s not listed as a partial payment. Deposits should never be listed on your contract as partial payments — it’s not a down payment on your car.
  • Pay with a credit card. You can easily dispute the charge with your credit card company if you decide to not go through with the sale.

How do used car deposits work?

How to compare your loan options

Securing the right financing is as important as finding the right car. Here are the main components of a loan you should consider:

  • Interest rate. The interest rate directly affects your monthly car loan payment. Most lenders will offer a range of rates, so be sure to understand your credit score and confirm that the rate you’re given is actually a good deal.
  • Fees. Lenders can charge a range of fees on used car loans — termination fees, origination fees, loan maintenance fees and more. Review all the extra costs that come with your used car loan since these will impact your APR and the amount you end up paying overall.
  • Flexibility. Can you make additional and lump-sum payments during your loan term? Are you able to repay your loan early without penalty? Is there a grace period for late payments? Make sure your loan is flexible so it can mesh with whatever life throws your way.

Higher interest rates on used car loans

Used cars might be cheaper, but loans tend to come with higher interest rates. That’s because car loans are secured by the value of the vehicle you’re buying.

Since used cars are worth less, your collateral isn’t as valuable. This makes lenders see you as more of a risk than a new car buyer, whose collateral is simply worth more.

Lenders tend to give borrowers with more valuable collateral lower interest rates because they stand to gain something more valuable if the borrower can’t pay back their loan.

How to use depreciation in your favor

Depreciation is often cited as the single largest expense when buying a new car. With over 40% of a new car’s value being lost to depreciation in the first three years, you can often find a better deal on a slightly used model.

Use sources like Edmunds and Kelley Blue Book to research the average price of the car you’re interested in. You’ll be able to see its original value and its estimated used value, which will then give you an idea of how much you should be paying.

By keeping depreciation in mind, you can use it in your favor to score a good deal. You’ll also be able to see the car’s estimated rate of depreciation, which can help guide you toward a car that won’t lose its value while you drive it — meaning you can sell it for a better price once you want to upgrade to a new model.

How to buy a used car

Follow these six steps to buy a used car.

1. Determine your budget

Before you start shopping, calculate how much you can afford to pay each month. List out your monthly expenses like rent, groceries, insurance premiums and other recurring costs, then subtract that from your monthly income after taxes.

You won’t want to use everything you have left toward your car loan payment though. Create a buffer for emergency expenses, too. And don’t forget to include upfront costs that come with purchasing a car, like a down payment, taxes and licensing fees, when setting your budget.

2. Find financing

Your next step will be to compare your loan options. While dealership financing can be useful, you should still know what kind of rate to expect and have a few backups just in case the dealership doesn’t come through. And if you’re buying through a private seller, finding financing beforehand is likely your only option to secure the sale.

3. Decide on the car you want

If you don’t already have a car in mind, it’s time to start searching. Dealerships, online car-buying programs and private parties often have a variety of cars available for you to choose from. If you’re looking for a car with newer technology and swanky features, you might want to opt for a newer used luxury car.

When you find one you like, use resources like Kelley Blue Book and Edmunds to determine its market value based on the year, make, model, mileage and condition. This can help when it comes to negotiating the price.

4. Contact the seller

Get in touch with the seller. If it’s a private listing, a phone call or email should suffice. If you’re planning on going through a dealership, contact the sales manager to confirm the car is still available and schedule a test-drive. There are numerous questions to ask when buying a used car, so go over those carefully before making a plan to inspect the car.

5. Inspect the car

When you inspect a used car, you’ll want to review its vehicle history report and take it for a test-drive to see if it’s worth buying. Take note of any serious accidents that have occurred or any mechanical issues that might have been noted in its maintenance records. Buying a used car is riskier than opting for new, so take care to ensure the vehicle you select isn’t a lemon.

6. Negotiate and finalize the sale

Once you’ve determined the car is worth buying, it’s time to start negotiating. Focus on the overall price of the car — rather than the monthly payments — to get the best deal possible.

After, you’ll need to determine if you want additional products like gap insurance or an extended warranty. Then all that’s left is to pay for your car — including the down payment, taxes and fees — and finish signing all the paperwork.

Should I buy a lease return?

If you’re looking for a newer used car with low mileage, a lease return may be a good choice. As the popularity of leasing increases, so does the availability of former leased cars.

But it may not always be the best deal. If you can find a privately owned car that still has its factory warranty and is only one or two years old, you may be able to take advantage of its higher sale price when you’re done driving it.

Bottom line

Opting for a used car can help you avoid the depreciation that comes with buying new. But you’ll want to compare your car loan options before hitting the dealership to ensure you’re getting the best deal available to you.

Frequently asked questions

Check out even more information about used car loans with these answers to standard questions.

What is the average term for a used car loan?

Loan terms vary by lender, but it’s usually between two and seven years for variable-rate loans or one and five years for fixed-rate loans. Longer loan terms can make your monthly repayments smaller — but you’ll pay more interest, making your loan more expensive in the long run.

How is the interest rate of my used car loan determined?

How much you put down, your credit score, income and personal financial situation all play a role in the rate you qualify for.

Will my credit score be affected when I apply for a used car loan?

It might take a small dip when a lender checks your credit. But as long as you apply for financing within a two-week period, your score shouldn’t be affected too negatively.

What are my loan options for buying a used car if I have bad credit?

Many lenders specialize in car loans for bad-credit borrowers, though you’ll likely be stuck with a higher rate and less favorable terms than if you had good credit.

What is a good APR for buying a used car?

What makes a good APR depends on your personal credit score. If you have excellent credit, a good APR could be 3% or 4% on a used car loan. If you have poor credit, the lowest APR you’re eligible for could be as high as 25%. It all depends on your creditworthiness and your options.

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