Tips for Getting an Auto Loan for an Older Car

A woman driving a car with the window down.

Did you know the average car on the road is 12 years old, and the average cost of a used vehicle is $26,000? These are both record-breaking numbers, but it should come as no surprise. Some brands and older vehicles are of higher quality and last longer than ever before. If you're considering purchasing an older model vehicle, you can find a great selection of durable, quality models in the used car market.

The only challenge is securing a loan with a low rate. In the past, loans for older cars have been difficult to find. But times are changing. Here are a few tips on car buying and getting an auto loan for an older car at a competitive rate that fits your budget.

Understand the Lending Landscape for Older Cars

Most lenders will have restrictions on car model year, vehicle quality, and mileage. Each lender will define their own requirements for vehicle model year and mileage. However, these limitations and financing options differ by lender.

If you want an auto loan for an older car, it's important to research and understand the lending landscape before you begin applications. Know your lender and their policies on used car financing.

Check Your Credit Score and Financial Health

Your credit score can greatly impact your eligibility for getting a used vehicle loan. Your credit history and income stability also play a part in qualifying.

A credit report in good standing shows that you are a low-risk borrower. Because older cars are considered a higher risk, a good credit score can balance out the risk factors that the lender must consider.

You can also quickly improve your credit score by:

  • Paying off debts
  • Keeping a low balance on your credit card
  • Taking out and completing small loans
  • Auditing your credit report for false or old information

Save for a Larger Down Payment

The larger your down payment, the more likely your auto loan for an older vehicle will be approved. This is because the lender is taking on a lower percentage of the financial risk associated with the car's prolonged value.

There are other benefits to reducing the loan-to-value ratio with a higher down payment.

  • Lowering the amount borrowed - and the interest to pay on it
  • Increasing your chance of loan approval
  • Increasing your equity at the time of purchase
  • Increasing your rate of equity acquisition as you make loan payments

Shop Around and Negotiate

Different financial institutions will have different loan terms and rates when it comes to financing an older car. Credit unions represent 1/4 of all used car financing and 64% of total vehicle loans by value. They tend to be more adapted to the evolving lifestyle of modern people because credit unions are cooperatives owned by their members, not distant shareholders.

This makes it possible to finance practical loans like used car auto loans, which have become increasingly common as cars extend in lifespan. Credit unions, such as ProFed Credit Union, stand out as some of the best lenders for the following reasons:

  • Lower interest rates. Credit unions prioritize providing superb financial services to their members over profit generation for shareholders. They offer more favorable loan rates and flexible repayment terms.
  • Personalized service. Credit unions are owned by their members, and they have a volunteer Board of Directors. Directors and staff are vested in ensuring that all other members feel satisfied with the services offered.
  • Lower fees. Credit unions, which are not-for-profit cooperatives and are tax-exempt, pass along savings to their members in the form of lower fees on loans and products.
  • Lower minimum loan amount. Compared to banks, credit unions can offer a lower starting loan amount. This means they can support you even when you need a slight bump to get you across the purchase line.

Always take the time to shop around with lenders to compare the best rates, terms, and fees for older car auto loans so you can find the best monthly payment to fit your budget. It is important to be proactive and assertive when advocating for yourself during the loan application and negotiation process.

Financing Your Older Car Purchase

If you have your heart set on an older vehicle, the best way to find the best auto financing is to take proactive steps to research your loan options and compare auto loan rates. Apply now online or schedule an appointment with ProFed Credit Union to learn more about used car loans and what you need to buy your desired vehicle.