Have you ever wondered why the used car loans are so popular and high in demand? It is for the natural desire of the people in owning private vehicles such as cars and motorbikes which is very high. The car manufacturers tap on this interest and seize this opportunity to make the best of it.
- To entice the people and their desire even more, the many car manufacturers are now offering several different types of financial help to the consumers.
- They are also looking for the best ways to market their products to the fullest seeing this opportunity.
In their list of cars, they have also included the luxury vehicles for the people to own which has also driven the people more towards owning a car, a luxury car at it, even if they do not have adequate cash in their hand.
Financial system and products
This rise in demand due to the natural desire has not only helped the car and bike manufacturers but has also influenced the financial institutions to make the most out of the situations. They have now come with a better and more improved credit system and loan products that have helped the people to use the proceeds for purchasing cars, new, old or luxury.
However, the price of the new cars is much more as compared to the used cars which is why most of the people decide to buy a used car. They therefore, have to take out a much smaller and even a cheaper loan which inevitably reduces their loan burden.
Realizing the opportunities, the financial institutions now provide their unique used car loan services that comes with not only at a low price but also along with several different attractive offers.
However, those who want to apply for used car loan,must take a look at the different advantages and disadvantages and then go ahead with their plan.
The disadvantages of it
Though used car loans are high in demand, everything in it is not advantageous. There are a few disadvantages that you should know about it. these are:
- The physical condition of the car: There is no doubt that the physical conditions of the used cars will be different from that of the new cars. not only the condition of the new car will be better but it will also come with a damage warranty from the manufacturer. This means, the manufacturer will repair the car immediately if it is broken. Moreover, the performance of a new car will also be better than a used car.
- The interest rate: The rate of interest for the used car loans as imposed by the banks, financial institutions and others are much higher than the rate of interest for the new cars. The simple reason to keep the interest rates of used car loans higher than the new cars loans by the lenders is that there is a higher chance of used cars being damaged as compared to the new cars.
- The warranty and insurance factors: You will also need to pay higher insurance premium for your used car which will eventually raise the cost of your loan. This is because used cars are more vulnerable to damages. Moreover, all used cars may not have an insurance. Even if you apply for a loan to a finance company for leasing, the damage to a used car will only be covered by the leasing insurance if only the total damage is more than 75% or if there is a chance of losing your car. It will not cover for the small damages. On the contrary, if you take out a new car loan you will automatically get car insurance.
The low selling price is also a point of worry when you buy a used car with a loan even though you may get it at a low purchase price.
The advantages of it
Now, the obvious question is why is that people are more inclined now to get a used car loan rather than a new car loan. Well, it is for the reason that the advantages of used car loans eclipse its disadvantages making it more preferred by the borrowers over a new car loan.
- Cheaper down payment: The most significant advantage of taking out a used car loan is that you will need to pay a much lower down payment as compared to a new car. Though the range of down payment may vary according to the regulation of the central banks, it may be at least 25% to 35% of the price of the car. And since the price of the used car is far less than a new car, the down payment is automatically low.
- The loan application process: As compared to the new car loans, the loan application process for the used cars are far easier and faster. With this faster administration process, you can start using the car immediately to meet your needs.
- Cheaper installments: Even if the used car loans may come at a higher rate of interest as compared top the new cars, the monthly installments of the used cars are much lower when you compare it with the installments of new cars. once again, it is the low price of the used cars that allows the lenders to offer these loans at a much lower monthly installment.
Therefore, when you weigh the pros and cons of the used car loans and compare it with that of the new car loans, you will always be better off when you decide to go for a used car loan.
However, if you do not want to suffer any loss when you take on a used car loan, you must use the car responsibly and properly. The best way is to make your car a source of income by renting it out. Also, be wise in selecting a used car and base your choice on good engine and physical condition so that you can reap maximum benefit from it.