Why are Used Car Loan Interest Rates Higher than New Car Rates?

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January 27, 2012

Used car loan interest rates are higher than new car rates for several reasons. The first is that the vehicle has begun to depreciate, and that lessens its intrinsic value to everyone by you, the buyer. Then, the car is an older model and it takes a little running around on the part of the finance manager to find financing. Third, the dealership will likely have to invest money into the vehicle on top of the money that was already spent as part of the trade-in process. This is money that has to be retrieved, so loan rates are higher. And, in general, banks and credit unions charge more for your used cars.

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