New versus used auto loans: what’s right for you?

Should you buy a new or preowned vehicle? A quick comparison of new and used auto loans can be a useful part of that decision-making process. After all, if you’re committing to financing a contract for the next several years, you’ll want to be certain it works for you.

Make sure you’re comfortable with things like the interest rate, monthly payment and what you’ll end up paying for the vehicle in total. Read through the advantages of each type of loan to understand which may suit you best and learn how Drive® customers enjoy more control in the car-buying process.

Advantages of new car loans

Lower rates – Interest rates are typically lower for new vehicles than used ones, although financing periods are usually longer.

Special rates – Automakers often offer incentives like special rates on certain models, which can be a big draw. These rates are not typically negotiable and may be dependent on a consumer’s credit history and other requirements.

Bonus cash – Money off a new-car sticker price is another common incentive provided by manufacturers and some lenders.

Sales events – Look out for year-end and holiday sales events when carmakers offer a slew of incentives.

Advantages of used car loans

Smaller loan amounts – Lower average prices and smaller loan amounts make buying a used car more affordable for lots of people. The average price for a new vehicle was $48,681 for November of 2022 (per Kelley Blue Book), compared to $31,025 for used, according to data from the National Auto Dealers Association (NADA).

Slower depreciation – New vehicles lose 20% of their value in the first year (per Experian), so buying preowned means someone else has already absorbed that loss.

Shorter loan terms – Used cars may have higher APRs than new ones but they typically have shorter loan periods, which means a shorter path to being car-payment free.

The Budget Customizer can help

If you get pre-qualified with Drive®, you’ll gain access to our Budget Customizer, which could help you find the right car and the right financing terms for you. The Budget Customizer has lots of different auto finance tools built into it. It can even search participating dealership inventories to find a car that could be the one you purchase based on the parameters you set. Getting pre-qualified takes about two minutes and it doesn’t impact your credit score.

Shop with confidence

Whether you choose a new or a used vehicle depends on your personal circumstances. But if you use some of the information that’s out there, you’ll know in a hurry which vehicle is the right one. From the Budget Customizer to picking the vehicle and financing terms, Drive® has you covered when you’re buying a new (or used!) vehicle.

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