Why Used Cars Usually Have Higher Interest Rates
Loan terms play a part on how big or small the interest on your used classic cars will be, and this depends on several different factors. If you wonder why used cars typically earn higher interest rates, knowing the nature of these loans will help you have a better understanding of the higher toll. One of the most probable reasons for the inflated interest rate is because most consumers who go for used cars in Savannah have low credit scores, which makes them subject to higher rates. Not only do used car buyers suffer lower credit scores—financing older cars is also trickier because they are much harder to value compared to new cars, which typically come with incentives. With new cars, depreciation is quite easy to determine as this typically amounts to losing 10% of the vehicle’s value once they are driven off the lot. With used classic cars however, it is much more complicated not only because of their age but also because of the potential issues they may have gotten over their years of being off the lot. These could mean mechanical issues or perhaps unreported accidents, along with other possible problems that could be hiding under the car’s hood. To make up for the intrinsic risk that financing used cars in Savannah entail, lenders typically reserve the better interest rates for new car sales and offer higher rates on older vehicles. There are many other possible reasons why interest rates are higher for used cars, such as lower resale value. New cars have better and easier to predict resale values as opposed to a used car that has several years and thousands of miles under its belt. Another major reason why used cars in Savannah attract higher interest rates is quite simply because lenders typically want buyers to purchase new cars that will provide them more profit since new cars cost more despite the reduced interest.