Is It Cheaper To Get A Bad Credit Car Loan On An Older Car Versus A Newer Model?

Dec. 23, 2009 - PRLog -- When applying for a car loan in general, people have this misconception an older model car usually carries a lower payment. This is not the case due to several factors.

Although it’s true an older vehicle usually has a lower price tag, but when it comes to financing there is less incentive for the bank to lend out this type of loan. Smaller “cap cost” (selling price) means lower profit, and due to the vehicle’s age and mileage. It is more prone to mechanical break downs and therefore this type of loan has a greater risk involved. A newer model car has the exact opposite effect, it can be stretched to a much longer loan term (for example instead of 36 month term, it can be financed up to 72 month), at a much lower interest rate on top of that, you can really notice the difference in the monthly payment.

To offset the risk factor the bank or lender will usually ask for a higher return on their investment, therefore a much higher interest rate. It is no surprise, sometimes an older vehicle can have an even higher monthly payment compare to a newer car. In another word if you had the choice to pay $300 per month to finance a car, would you drive a 2005 Honda Civic or a 2002 Mazda.

When this scenario is played out in the bad credit car loan market, it is even more dramatic. The interest rate difference can be astounding ranging from as little as 8% to as much as 29%. If you have the funds it is usually a good idea to pay for the lower priced vehicle in whole, that’s how can take advantage of the pricing.

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Auto Credit Financial is Toronto's top bad credit car loan provider, located in the east end of Toronto, they have helped thousands of clients to obtain their car loan. With a team of credit specialist, and over 100 vehicles in inventory we can approve everyone regardless of your credit.