It can be easier to find financing for a brand-new vehicle even though it may have a higher price tag, which may sound like a counterintuitive fact. Yet, there are reasons why finding a new car loan can be an easier thing to do than finding an auto loan for a used vehicle.
A new car is going to hold its resale value better.
Lenders like to know that what they are loaning you money for is going to hold its resale value well, and used vehicles can have questionable abilities to hold resale value. Some vehicles will rapidly drop in value once they have so many miles on them, for example. New cars lose value with time just the same, but the rate of value change does not happen so quickly in normal circumstances. For example, if you buy a used car and put 30,000 miles on it, it may end up with over 100,000 miles, which would drastically affect its value. If you buy a brand-new car and do the same, you still have a vehicle with fewer than 100,000 miles. Therefore, the car would still have a high resale value.
It is far easier to determine the value of a new car.
When you buy a used car, there are a lot of variables that can affect the value that is proposed by something like Kelley Blue Book (KBB). For example, a car that would normally be worth $10,000 may have its value negatively affected if the car has high mileage or interior damage. Lenders are pretty much making an educated guess about a car's retail value when someone is trying to obtain a loan for a used vehicle. Unfortunately, any fallacies during this process can be costly to them if the borrower does not pay off the loan, and they have to sell the vehicle to recoup their losses.
More dealerships offer to help you finance new cars.
It is trickier to find financing for a used car at a dealership unless you don't mind some kind of buy-here-pay-here loan with a higher-than-usual interest rate. Dealerships who sell new cars are more likely to offer to finance through them, which really means the financing is through the banks that they partner with. Since financing a new car is a more straightforward process without a lot of questions about the car's value or how long it will hold its value, most dealerships don't mind helping with the process.Share