Buying a used car is a great way to save money and get a reliable ride. However, many drivers in Centennial, Aurora, and Denver have questions about financing their pre-owned vehicles. Mile High Honda created this post to help drivers finance used cars successfully. Here are five tips for financing a used car.
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Used Car Financing Tip 1: Understand Your Credit Score
Before visiting a used car dealership, get a copy of your credit report. Understanding your credit score will help you get the best interest rate when applying for a used car loan. Do this at least three months before purchasing a used car so you have time to shop around for interest rates.
Used Car Financing Tip 2: Get Used Car Financing Quotes before Visiting a Dealership
Used car shoppers can get an auto loan through their dealership, bank, or local credit union. Before applying for used car financing, get a quote from each of these parties. This information will give you leverage when negotiating the terms and interest rates on your auto loan.
Used Car Financing Tip 3: Keep Your Loan Terms as Short as Possible
Longer car loans come with smaller monthly payments. However, interest costs go up the longer it takes to repay the loan. It’s tempting to stretch a car loan over five, six, or even seven years to reduce your monthly car payment, but you could end up paying more than what the car is worth.
Used Car Financing Tip 4: Make a 20% Down Payment
Used car shoppers can avoid paying more than their car is worth by making a large down payment. We recommend making a 20% down payment. It may be tempting to make a smaller one, but if a situation arises where you need to sell your car, you may be unable to if you owe more on the loan than the car’s value. Making a 20% down payment helps to prevent this.
Used Car Financing Tip 5: Pay for Registration Fees, Sales Tax, and Documentation Fees with Cash
Many dealerships will bundle registration fees, documentation fees, and sales tax into your financing. This is a recipe for negative equity, or owing more on the loan than the car’s value. Pay for any extras, including taxes and registration, in cash to keep your auto loan as small as possible.
Financing a used car can be tricky, but Mile High Honda is committed to helping drivers in Centennial, Aurora, and Denver get the best possible deal on their auto loans. If you have any questions about financing a pre-owned or Certified Pre-Owned Vehicle, please contact the Finance Department at Mile High Honda. You can also reach us at 855-532-0404.