Nissan Financing: New Versus Used Car Loans

auto loan

Before you set out to purchase a new or used vehicle from your local Elgin or St. Charles dealership, there are some importance differences in Nissan financing options between new and used cars. Lenders use two different sets of rules for valuing and assessing car loans depending on whether it is used or new. For those struggling with past credit problems, this doesn’t necessarily mean that you are limited to buying a used car. In fact, you may find that lenders are more generous when you’re looking at a new car instead. Here’s why:

Down Payments

Perhaps the biggest area of difference between getting a new car loan and a used car loan comes to the down payments. As a borrower, you want to know how much money you will have to pay out of pocket to close the deal. Many dealerships offer zero down incentives for new cars only. That’s because the lender already knows the value of a brand new car that has never been off the lot. They are likely getting a markup on the vehicle so they can afford to finance the entire cost of the car outright. On a used car it is much more difficult to verify the condition of the car for the lender. Differing levels of depreciation make it impossible to get a solid idea of what the car is worth and how long it is likely to keep driving. Some less than scrupulous take advantage of lenders by selling cars that are in bad shape and forcing the lender to try and recoup their loss from the customer on their own. As a result, most used car lenders will only approve up to 80% of the estimated value of the used car. This means that you need to have a 20% down payment ready to go, and maybe more.

Interest Rates and Payment TermsĀ 

Typically, the difference in price between a new and used car also has a large impact on the loan you receive. Again, new car loans often come with rate discounts as an incentive, lowering your payment over a longer term so that you can get into that nice new vehicle. On the other hand, interest rates on a used car are usually higher, and you will have a harder time convincing the lender to stretch your payments out. Even after making a 20% down payment, this could make your used Nissan financing more expensive than buying new, especially if the used car you are looking at is more expensive than some of the smaller new cars on the lot.

The most important thing to remember is that lenders are usually willing to work with you even if you have a shaky credit history, but only you know what you can really afford. Don’t get pressured into taking on more financing than you can handle, but also don’t limit yourself too early in the shopping process. Seek assistance from a lending specialist at McGrath Nissan in Elgin and near West Dundee and Streamwood to see how much you actually qualify for and what your best option will be.