Purchasing a used car is an excellent strategy for avoiding the substantial depreciation associated with buying a new vehicle. As the economy continues to recover and sales of new cars accelerate, dealers are eager to liquidate their growing inventory of trade-in models. This presents anyone in the market for a pre-owned vehicle with an opportunity to acquire a late model car at an exceptional price.

Prior to actually purchasing a car, it is important for the buyer to establish borrowing limits and pre-qualify for a used auto loan. Local area Credit Unions offer competitive loan rates and can help members determine exactly how much they can borrow for a particular make and model.

Understanding Used Auto Financing

While the process for getting a used car loan is similar to obtaining new car financing, there are several key differences. Since the collateral on a new car is considered to be of better quality, the loan term for used cars is usually of shorter duration. Interest rates are also typically higher for used vehicles because the lender’s exposure is greater.

There are a number of criteria that are used in evaluating a borrower’s application for a used auto loan.

• Credit Score: Perhaps the most critical aspect in a loan evaluation is the borrower’s credit score. The components used to calculate a person’s credit score include payment history, debt ratio, new credit applications, the length of credit history, and credit diversity.
• Credit History: The buyer’s credit history will have a significant impact on interest rates or whether the loan is issued at all. A poor credit history as a result of continuing delinquent payments can restrict loan amounts and raise interest rates.
• Income: There may be some situations where the requested amount of the loan is not supported by the borrower’s income.
• Employment: A stable job and strong employment history will help convince loan officers that the borrower is in a favorable position to repay the loan.

Choosing a Credit Union

Credit Unions offer extremely competitive interest rates when compared to a bank or auto dealer. Members benefit from exceptional service, lower monthly payments, and substantial savings by financing a used auto through their local Credit Union.