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Used Car Financing

Used car financing

Used cars can get finance from banks, credit unions, dealers, financial institutions and private individuals. Checking out the different financial opportunities in order to make comparisons is a good idea. When inquiring about rates and terms, check out the finance options for a specific model.

Most financers do not provide loans to vehicles that are more than 5 years old because of the low resale value.

Examine different used car insurance deals and select the one that suits you best. Ask yourself- Can you afford to pay insurance premiums along with the car payments?

used car maintenance costs and unexpected repairs should also be considered while applying for the loan. Allow a little extra in your budget to meet these expenses.

Documents Required

You need to collect certain documents to submit along with your loan application:

Warranties: All dealers are required by federal law to let buyers know whether a used car is being sold with or without a warranty. Used car dealers in your state must clearly display information on services and guarantee in writing in the contract. The final copy of the buyer's guide must list the parts and services covered.

Odometer Statement: Federal law considers tampering with odometer a felony. Regulations require the seller of any used vehicle to state the odometer mileage upon transfer of ownership. Get a copy of the odometer statement when you sign the contract.

Insurance: Most financiers will ask for insurance cover on your vehicle, some may even offer to include the cost of the insurance - but whatever the case the law requires you to have liability insurance. Some lenders may even ask for collision insurance. Understand all of your insurance responsibilities before you apply and have all the papers ready.

Vehicle History Report: This is a great resource while buying a used car. Some financiers insist on one. A used car check can reveal reported wrecks, recalls, damage due to flood, fire or accidents and even odometer fraud. For instance, flooded cars will face problems such as:

Electrical system failure

Transmission failure

Anti-lock brake system failure

Airbag failure

Mold and musty smell


A credit history report will save you from being conned into buying a flooded car.

Every car has a different VIN number which carries all information, that has been officially reported about the car.

Certificate of Title: This refers to a certificate issued by a title company or a written opinion by an attorney that the seller has good marketable and insurable title on the car that he is offering for sale. The dealer is required to register and transfer the tag and title of the vehicle in your name within 20 working days. He is required by law to provide you with the original receipt and original title.

Certificate from reputed garage/mechanic: Most banks accept a certificate from a reputed garage or mechanic determining the market value and the residual life of the car. Some lenders on the other hand send agents to assess the value of your car by examining the mileage, condition of the engine, the physical appearance etc.

Bill of sale/Deed of sale: Some banks also ask for sale deeds to verify sale deals.

Vehicle information: Information about the vehicle's make, model, manufacturer, year, purchase price, VIN should also be provided.

Personal Financial Information that must include income, outstanding debts, assets, credit history etc.

After you submit the necessary documents, the bank will check your credit history and ascertain the loan amount. If satisfied, loans that cover between 70 per cent and 80 per cent of the market value are sanctioned.

However, the interest rates for loans are much higher than they are for new cars. The interest rates again vary based on the model, the year of manufacture, the condition of the car and loan term. The loan tenure is also much lower than that for a new car.

The paperwork is the same as that for a new car but the processing fee is higher for second-hand cars. So be sure to check the APR.

You can negotiate the interest rate depending upon your loan amount, loan tenure and how much down payment you make.

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