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Best Used Auto Loan Interest Rate

Michael Jones

Auto Loan Expert

Nearly everyone will need to buy a car at some point in their lives. Most car buyers will not have the ability to buy a brand new car, and so there’s a thriving used car market. However, it can be intimidating to buy a used car. There are a number of different factors that buyers need to keep track of. That’s why we’ve put together this helpful guide to help you get the best deal on a used car.

The Best Place to Buy Used Cars

One of the first issues that any used car buyer needs to resolve is where to get a used car. There are two primary options for consumers: buying a used car from a dealer, or buy from a private seller. Each of these choices has its own pros and cons.

Buying a Used Car from a Dealer

Best Used Auto Loan Interest Rates

Dealers are the most common choice for used car sales. A dealer is a company that sells cars as its primary business. Many dealers get used cars as a trade in when someone buys a car from them. As a result, dealers usually have a wide selection of used cars.

 Greater protection under the law

 Greater opportunity for warranties

 Car is more likely to have routine maintenance done

 Car is more likely to have been inspected

 More financing options

 Ability to trade in old car toward cost of your new used car

 Customer support

 Established trust and credibility

 Dealer handles title transfer and other bureaucratic processes

 More likely to have vehicle history

As you can see, buying from a dealer gives you all of the benefits that you get from using any professional business. The dealership has a closer scrutiny from regulators, and thus has to meet higher standards for the cars they sell than private sellers do. However, there can also be some drawbacks, namely:

 More expensive

 May not be as motivated as private seller

 More paperwork

 Less ability to haggle or negotiate

 Less personal

 May not have the type of car you’re looking for

Dealers are not as flexible as private buyers, and so the disadvantages of using a dealership all center around that lack of flexibility. Furthermore, the things that make a dealership attractive, such as tighter regulation, also have their own tradeoffs, like more paperwork.

Buying a Used Car from a Private Seller

Buying a Used Car

Dealerships aren’t the only place to go for used cars. Many private individuals are also looking to sell their car directly. Private sales can be more attractive to some customers, and less attractive to others depending on their needs. There are a number of benefits to purchasing a used car from a private seller.

 Greater variety

 Easier to negotiate or haggle

 Prices are usually lower

 Less paperwork

 More payment options

Private sellers don’t have the overhead or organization that dealerships do, which can work to the customer’s advantage. Moreover, because buying from a private seller is a private transaction, customers can pay through any method the seller agrees. This means customers could pay with Paypal, bitcoin, or even trade labor for the car. No matter how flexible a dealership is, it is very unlikely they will let you work off the cost of your used car.

Private sellers do have their fair share of disadvantages though, including:

 Less oversight

 Less legal protection

 Potentially unsafe

 No warranty

 No recourse through business organizations like the Better Business Bureau

 Harder to verify car condition

 Can’t trade in toward payment

 Harder to get vehicle information

Private used car sellers don’t have the same protections that dealerships have. As a result, there are fewer options for buyers to redress issues. Moreover, buying a used car from a private individual can be unsafe, especially if the transaction involves a large amount of cash.

As you can see, private used car sellers and used car dealerships each have their own benefits and disadvantages. Buyers should carefully weigh these and determine the best used car source for them based on their needs and priorities. A buyer that needs a car quickly and is confident about their ability to evaluate the car’s condition, may prefer a private used car seller. However, buyers that lack mechanical know-how or want more protections may prefer a dealership.

Things to Check When Buying a Used Car

As with any purchase, it is important to make sure you are getting the best value when you are buying a used car. After all, no one wants to wind up with a lemon! However, cars are more complicated than many purchases that we make. In fact, it has been argued that a car is the second most complex purchase most people will make, next only to a house. There are a few things that a buyer can look into in order to determine if the car they are considering is worth the price being asked for it.

Vehicle History

One of the first things that any savvy used car buy should consider is the vehicle’s history. Cars that have been in accidents are more likely to have underlying issues that haven’t been detected yet. Additionally, cars that have had major repair work or major components replaced are also more likely to run into problems down the road. Understanding what, if any, accidents a car has been in, and the extent of the damages, is a good indication for what you can expect from the car.

Another indicator of the car is the ownership history. Cars with more owners are more likely to encounter problems, as people are more likely to trade in or sell their car when they feel a major repair bill coming up. Cars with fewer previous owners are more likely to be taken care of and well maintained, decreasing the risk that they’ll need major repair work.

Vehicle Condition

Another important factor to consider when buying a used car is the condition of the vehicle. Buyers do not need to be certified mechanics to spot many problems. For example, what is the condition of the interior? Is it clean and well cared for? Full of rips, tears, and stains? Are there handles, buttons, or levers broken? Not only will these observations give you a better idea of the value of the car, but they will also provide insight into the car itself. A used car with a ripped and stained interior is less likely to have been maintained mechanically, and thus should be a red flag.

Another thing that buyers can evaluate is the bodywork. You should be sure to check the condition of the paint, looking for dents, breaks, and scratches. Buyers can also look for signs of rust. If a car was kept in an environment that allowed rust to form in one place, than it can form in other places as well. Buyers should be especially aware of rush when buying cars from locations that get regular snowfall. The grit and salt used to keep roads safe from snow and ice can also play havoc with bodywork and mechanics.

Finally, buyers should do a visual inspection of the engine. Once again, one need not be a mechanic to make basic observations. Buyers should check for rust spots, leaks, and general condition. They should look at the belts to see how worn down they are and to check that they are properly aligned. Engines that have rust spots, leaks, or worn belts are more likely to need service in the future.

Once users have checked the interior, bodywork, and engine of a used car and found them suitable, the next step is to take the car for a test drive.

Test Drive Checklist

It is important to give the car a full evaluation before buying it, and a test drive is a great way to get an understanding not only for the condition of the car, but to determine if it is enjoyable to drive and will meet the buyer’s needs. When you’re on a test drive make sure to do/check for these things:


Turning Radius


Visibility in front of, behind, and through
mirrors of the car


Left Turn


Unusual smells


Right Turn


Steering responsiveness


Freeway acceleration




Stopping time/distance


Radio/CD/SAT/Audio Input + speakers


Noise from loose or missing seals




Engine noise – it should be regular and even. Sounds that are out of rhythm or seem out of place are a red flag



Following this checklist will give you a good idea of the state of your car. Most dealerships and private sellers will also allow you to take the car to a third-party mechanic so that you can get an unbiased opinion about the car’s mechanical health, and what, if any, major repairs will be needed soon.

Paying for a Used Car

Once you’ve found a car that suits your needs and have ensured it is structurally and mechanically sound, it is time to pay for your car. While you can buy a car outright with cash, a check, cashier’s check, money order, or other method, most people will need financing. Getting a loan for a used car is a bit of a mysterious process, so here’s some things you should know:

The Loan

Used car loans most often come from banks, though some dealerships will also offer financing. Most banks will allow you to pre-qualify before you start shopping for a used car. This will give you a better idea of how much of a loan you can get, so you can narrow your price range ahead of time.

Interest rates for used car loans are usually lower the newer the car is. This makes sense, as the newer the car the more value the bank can get for it should you default, therefore newer cars are a lower risk to bank. Your interest rate will be based on your credit score, and your monthly payments will be determined by the total cost of your loan. One of the best way to get your monthly payments lower is with a down payment.

used auto loan

The Down Payment

A down payment is how much money you pay toward the car upfront. Part of your down payment can include the value of any trade in should you use a dealership. Down payments lower the overall amount of money you will need to borrow for the car, and so make your monthly payments lower. Depending on the interest rate you are offered, it may be better to make as large of a down payment as possible to reduce the monthly bill.

used auto loan


Everyone who drives understands that they need car insurance. However, some people may not consider how their insurance interacts with a car loan. If you need to finance your car then it is likely your lender will require you to take out a comprehensive coverage insurance policy, which will be more than the state minimum insurance in most cases. This can add to your insurance if you previously only carried the minimum, but does protect you in case the worst happens. Having comprehensive insurance means that if your car is totaled you won’t have payments for a vehicle you no longer own or use.

used auto loan


The last thing that buyers have to decide is if they want any kind of warranty, assuming that is an option offered.

Advantages of Warranties

 Reduced cost of routine maintenance

 Reduced cost of major repairs

 Protection from unknown mechanical issues

 Indication of vehicle quality

Disadvantages of Warranties

 Cost more money, which could mean a bigger loan

 May not be used

 May not cover issues that come up

 Issues may not justify cost

It is up to each buyer to determine if they should get a warranty based on the car they are getting and their specific needs and budget.

Final Words

As you can see, there are a number of ways to make buying a used car less stressful. Be sure to understand what you are looking for and to carefully evaluate the car before making a purchase, and you’ll find yourself on the road in no time.

buying used car


Used Auto Loan Basics

In this section, you will find answers to common questions that have been asked about used auto loans.

Why do used car loans vary so much?
Used car loans vary so much because they have more financial risk and the loans are usually high.
How to calculate EMI for used car loan?
To calculate EMI for used car, enter the loan amount, interest rate and duration (length) of the loan on an online EMI calculator.
How to calculate used car loan rates?

Divide the interest rate by the number of monthly payments then multiply by the principal amount of the loan. It may be helpful to use a car finance calculator for this.

What is the formula used to calculate a car loan?
The formula for calculating a car loan is dividing the interest rate by the number of monthly payments. Then multiply by the total amount of the loan.
What if I can’t get pre-approved for a used car loan?
If you can’t get pre-approval for a used car loan, then you have to fund the purchase by yourself. Credit Unions with flexible repayments and low interest rates are also options to consider.
Do banks have used car loans where the payment is less than 100.00/mo.?
That is hard to come by. Credit Unions might offer same service better than banks.
What are unexpected fees when getting an auto loan for a used car?
There are additional fees that tag along with used car loans. Some of these are Prepayment Penalties and Extended Warranties.
What are the restrictions for a used car loan?
Lenders have guidelines for used car loans. Restrictions such as mileage and age of the used car are very important.

Some lenders require that a used car should not be older than 12 years of age. So if you’re applying for a 5-year used car loan, then the car should not be older than 7 years at the time of purchase.

Used Auto Loan Process

This section covers steps you need to take to get a used auto loan.

Can I get a loan on a used car?
Yes. Loans are issued for used cars but they’re always pricey.
How to get a loan for a used car from a private seller?
Find out the eligibility status such as credit score requirements. Then check the Annual Percentage Rate and compare it with the age and mileage of the used car. If the conditions are favorable, then apply for the loan.
How to shop for a used car loan?
Decide how much you can afford to spend for the car and find out from banks and credit unions if they could approve such loans. If they can and funds are approved after the verification, then shop for a used car that matches the amount you were loaned.
How to get a used car loan?
Choose the type of used car you want and the features you want in it such as mileage. After that, shop around for dealers with best rates and start necessary documentations such as ID and income status.

Also discuss with the lender (such as banks or private sellers) and find out the duration of the loan     and interest rates before applying.

Are there credit unions who provide used car loans?
Yes. Credit Unions such as Alliant Credit Union and NASA Federal Credit Union offer low APR on used car loans.
What are the qualifications for used car loan?
You’ll need to tender a proof of income, proof of insurance, proof of identity, proof of residence and trade-in documentations to qualify for used car loan.
When buying a used car, do I apply for an auto loan or personal?
It is better to apply for auto loans because qualification process is easier. Interest rates are also lower.
What income proof is needed for a used car purchase?
Bank statements, credit cards and pay stubs are needed for a used car purchase.
How does online used car loans work?
Online used car loans let you compare rates and learn if you’ve been approved for a used car loan. You have to select your credit score range and enter your residence to check availability of a loan.
How can I find out if a used car has a title loan before I buy it?
Check the status of the title loan (Lien) by entering the make, model year and VIN of the car at the DMV website.
Can you get a used car loan when you are a temporary?
You can get a used car loan while on a temporary job. Find out lenders that accept contract workers to apply for a used car loan.
How to cancel used car loan on the next day?
If you do not wish to continue with the loan, contact the dealership and make your decision known. Then pay the interest rate the car had already accrued.
What is an unsecured used car loan?
Any used car loan that does not require collateral or cosigner is called Unsecured Used Car Loan. Instead of this, what is required is the borrower’s credit history.

Duration of Used Auto Loans

This section covers some questions on how long it typically takes when financing a used car.

Can you finance a used car for 84 months?
Yes. The good thing about this is that you’ll have minimum repayments for the loan on monthly basis.
How long should you finance a used car?
The duration of the finance is determined by the amount you borrowed. It can take two years (24 months) at the minimum and 84 months at the maximum.
Can you get a used car loan for 60 months?
Yes, you can. A 60-month loan for a used car makes repayment flexible. You will have access to decent monthly payments and lower auto loan rates.
Can you get a 72-month loan on a used car?
Yes, you can. But it has ominous tidings. You will be confronted with higher interest rates. In addition, you might end up financing the interest instead of the loan.
What is the longest loan term for a used car?
The longest length for a used car loan is 84 months (7 years).
How long of a term can I get on a used car loan?
Seven years (84 months) is the longest term you can get on a used car loan.

Used Auto Loan Interest Rates

Usually, borrowers are confused on the average interest rate they have to pay for used auto loans. In this section, you will learn some rates that are paid on used auto loans.

What is a good interest rate for a used car?
Interest rates for a used car are calculated by your credit score. If you have good credit, the interest rate is usually 5%.
What is the lowest interest rate on a used car loan?
The general lowest rate on a used car loan is between 2-3%. 5% is also considered a low interest rate but you need to have good credit to qualify for it.
What is the largest used car loan?
The largest is a period of 84 months (7 years) and interest rates start from 4%
What is a good APR for a used car loan?
The average APR for a used car loan is 4%.
What is the interest rate on a used car loan?
Interest rates on used car loans are usually influenced by the age of the car, the interest rate and duration of financing the loan. However, the average interest rate is 4%.
What is average APR for used car loan?
The average Annual Percentage Rates (APR) for used car loans is a little above 3% for used cars. Good credit also reduce the rates.
What is a good interest rate for a used car loan in 2018?
Interest rates vary by credit scores and lenders. A good interest rate for a used car loan is 4%
What is a typical certified used car loan rate?
A typical certified used car loan rate is between 5-6.5%. This can be negotiated to 4.5% if you have good credit score.
How much is a Loan Processing fee for a used car?
Loan Processing fees (Origination Fees) are few percentage of the total loans. The average fee is 2% of the total amount.
What is a reasonable interest rate for a used car loan?
Interest rates vary from lenders and credit scores. A reasonable interest rate starts from 4%
What is average interest rate for used car loan?
The average interest rate for used car loans is 4%.

Used Auto Loan Repayment

Paying off loans seem a herculean task to some borrowers. If you want to know how to start paying off used auto loans, you will learn how in this section.

How much should I put down on a used car?
The right down payment on a used car is 20% of the total cost of the car. Lenders might however require more down payments.
What are monthly payments on a 25000 car?
Monthly payments are calculated by the total amount taken in loans divide by the interest rates and duration. For instance, if you take a $25000 loan for four years at 4% interest rate, your monthly payments will be about $317.
How much is a car loan for 20000?
 If you took a car loan of 20,000 for a period of five years at 5%, the total amount to pay will be $22,645.48.

Used Auto Loan and Credit Scores

Credit scores and credit history play an important role in getting a used auto loan. In this section, you will learn the credit score that is required for used auto loans and other ways of getting a loan with bad credit.

Can you finance a used car with bad credit?
Yes. However, there is a need to apply with an auto financing lender or a larger national bank.
Can you finance a used car with no credit?
It is possible but a little tricky. You will have to get a cosigner around and also pay larger down payments.
Which credit bureau is most used for auto loans?
Credit bureaus differ from dealers. However, the FICO Auto Score 8 is mostly used and there are other variations such as Equifax Beacon 5.0.
Which credit score is used for auto loans?
FICO Score 8 is the standard credit score for used auto loans. Lenders who make us of Experian credit reports also TransUnion Auto Score 4 and Equifax Auto Scores 8 and 5.
How to get a used car loan with bad credit?
If you have found out your credit score and you cannot build your credits before applying for a used car loan, you can shop around for best rates. If you have good relationships with credit unions and banks, you can pre-qualify with them and have access to manageable loans.

Consider bringing a cosigner along and avoid buying the used car and paying later.

Which FICO score is used for auto loan?
FICO Score 8 is mostly used for auto loans.

Used Auto Loan Sources

Banks are a primary source for used auto loans. You can also get the loan from other sources. This section covers alternative sources for used auto loans.

Where to get a used car loan?
Though larger banks offer these loans, you can also get used car loans from credit unions, online lenders and private sellers.
How much will a bank loan on a used car?
Banks use the Loan to Value (LTV) ratio to calculate how much to loan for used cars. The amount is not specific but if you want to get a loan on a used car worth $25,000 and the lender has an LTV ratio of 20%, then you will get $30,000 as loan.
Whose credit score is used on a joint auto loan?
The person with the highest income will have the credit score used on a joint auto loan.
What kind of a loan can i get for a 15 years old used car?
A 15-year old used car loan is hard to come by. But if approved, a Secured Personal Loan is what you get.
Who has the lowest used auto loan rates?
Credit Unions such as Lending Club are one of auto loan lenders that have lowest rates. Interest rates start from 3.99% and bad credits are also accepted.
Who has the best used auto loan rates?
Consumer Credit Unions have the best used auto loan rates because they offer low interest rates and flexible repayments.