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Take Advantage of Vehicle Loan Process and Know the Terms

Most people are not able to afford a new car outright but that doesn’t mean they can afford a used car outright either. With that in mind, any person who wants to purchase a vehicle will need to take out a car loan that will finance the vehicle. There are several lenders a person can go through such as a bank, finance companies and credit unions; many of these places will specialize in vehicle loans. It’s not uncommon for dealerships to finance the loan as well.

Buying A Car: How The Vehicle Loan Process Works, How It Affects You

Before you sign anything, you should have an understanding of how the loan process works. Bear in mind that used car loans are a bit more complicated than new car loans, and it’s not uncommon to pay a higher interest rate for your vehicle. Why is that? The lender’s rationale boils down to two things:

1 – Your vehicle will break down before your loan is paid off.
2 – You, the borrower, will default on that loan.

For that reason, you should speak with several lenders to see what interest rates are the best. Never go with the first lender to be your vehicle car loan holder.

A lender will determine the used car’s value, basing it on one of several guides. To ensure that the value amount the lender has is right, it’s best to check it out for yourself. You need to look into whether or not there are prepayment penalties or term modifications. You also need to look into the issue of what happens if you default. A car loan can be very confusing and you don’t want to have any surprises creep up on you in your signed contract.

The majority of dealerships have some kind of institutional financing they depend on. If you choose to purchase a vehicle from a private seller, they may be willing to hold the loan themselves. In most private car seller cases, they tend to want the entire price of vehicle upfront. However, some sellers may be agreeable to a used car loan. It’s important that you and the seller are careful with how things are handled including payment schedule, interest rates and what happens if a default should occur (this should be written out).

The terms of your used car loans will also be based on your credit rating and history. If you have bad credit or not so good credit, the loan terms are going to be stricter. You will be subjected to a higher interest rate compared to someone who’s got impeccable or good credit. Not only do you have to worry with a high interest rate when you have bad credit but you have to deal with the possibility of a down payment or a large monthly payment.

When the economy goes south (bad), it can be extremely difficult to maintain your used car loan payments. If this happens, you might be able to refinance your vehicle. It would be in your best interest to send off a hardship letter to your lender, asking them for the refinance and why. Since a used vehicle is difficult to sell, the lender may decide that refinancing your vehicle is better than you going into default. Always send the letter before you realize you can’t make a payment.

Vehicle Price and Value: Several Key Factors That Can Affect A Used Car’s Value

When you buy a used vehicle, it means a large investment, usually of thousands of dollars. Used cars are generally less expensive than new cars but it’s still a costly venture that requires you to take out a used car loan. Thus, it would be in your best interest to learn what determines the price of a vehicle. Sure, you can get a good idea how much the vehicle you’re looking at is valued by checking out the Kelley Blue Book but it should not be the only thing. You should always consider other factors.

Several Factors That Determine A Vehicle’s Worth

Factor 1 – Age

Most people tend to look at the vehicle’s age when they’re looking for a car to buy. Older vehicles tend to be less in price but they also have a significant past. An older vehicle that doesn’t have a lot of miles on it would seem not to have a lot of stress on it but that’s not true. Simple fatigue can hit after so many years. If you based the car’s value on age, then it just reflects that the older the vehicle is, the more prone to problems it’s likely to have. It’s also harder to get replacement parts for older vehicles.

Factor 2 – Mileage

Another big factor that determines a used vehicle’s value is its mileage. If the vehicle has high mileage, it’s gotten more use and wear and tear. Thus, the vehicle’s value will be lower. Once a mileage threshold has been reached, regardless of the vehicle’s age, it’s older than its actual years.

Factor 3 – Vehicle Make/Model

Believe it or not, but a vehicle’s make and model will have a tremendous impact on the value. Certain vehicles are already expensive to start with, which means they’ll be higher priced. Popular cars, not-so popular cars and preferences will also play a role in the value of a car. The value for a used car that’s popular is always going to be more than the value of a not-so popular vehicle, despite being similar in other ways.

Factor 4 – Warranty

A person can purchase a used vehicle several ways such as a private seller or a used vehicle dealership. If a person is buying privately, the vehicle is typically sold “as is”, meaning if anything goes wrong… you eat the costs to pay for it! However, a vehicle that’s been sold through a used car dealership may have some kind of warranty still on it. A used car dealership is more likely to determine a car’s value than a private seller would.

Thanks to the lemon laws, there is some added protection to buying used vehicles. These laws tend to affect used car dealerships, making the dealership honor any warranty it offers. Should something go wrong and the warranty covers it, the dealership must do one of three things:

– Replace the defected part
– Repair the vehicle
– Refund the buyer’s money

This does give the buyer some guarantee in the event the car isn’t reliable but it does affect its value too. Most consumers, however, consider paying a little more for a used vehicle is worth it if the vehicle proves its dependability and reliability.