In order to obtain the best possible used car interest rates, it is crucial that you fully understand two aspects: the current marketplace for vehicle interest rates – including here financing offers and different lender options – and your current personal financial situation (including limitations). You need to know that there are a bunch of factors that determine these used car interest rates, as follows:
a) Lender – unless you have managed to borrow the money privately, it means that you will be getting the necessary funding from a bank, credit union or the automaker’s financing arm. Each of these situations has its own sets of pros and cons;
b) Make & model – the interest rate will also depend on the make and model of your car, along with the year of manufacturing and other similar aspects;
c) Length of the loan – the loan’s length plays a major role in the interest rate for any type of loan and the general rule is that the longer the loan is, the higher the interest rate will be so try to keep it as short as you can;
d) Credit rating – those with a better credit situation will get more affordable used car interest rates, it’s a known fact.
The primary lending source for all car buyers are: banks, credit unions and the carmakers. Obtaining a loan via the latter option is not necessarily the most expensive option you have. The car dealers borrow money at wholesale interest rates and after that they mark up and hand it on to you. Due to the reason that the rate of the dealer is lower, the one that you’ll get may not be higher than the one that you arranged yourself.
You also have the credit union option, which at the moment provide less than 20% of all car loans. They usually have good used car interest rates and to give you an example, last year’s average credit union interest rate for a used car was 4.5% while the bank’s rate was 6.1% (source: National Credit Union Administration and Datatrac).