Used Car Loan Values

Buy a new car or a used car? No doubt that this is one of the biggest questions you’ll have to grapple with when shopping for a car. New cars have their advantages, we give you that. However, they could also take a hefty chunk from your budget when you go out and purchase one for yourself. In the end, all the perks that come with a new car purchase might not be enough to cover expenses you’re left with when it’s time for you pay the monthly bill.

So why not buy a used car? With today’s present economic trend, lots of folks are nervous about buying a car, let alone a new one. If you find that a car is an absolutely necessity for you, then get a used one. New cars can cost you around $21,000 or more. Used cars cost a lot less for around $15,000. With this in mind, it makes a lot more sense buying a used car than a new one.

According to the Auto Affordability Index compiled by Detroit-based Comerica Bank, it takes 19.9 weeks for a median family income before taxes to buy a new car. That’s about five month’s worth of salary spent on an automotive. I can think of a dozen other better ways of spending that amount. Is it a wise way to spend all that hard-earned money on a new set of wheels? $21,000 on a car is not only unwise but foolhardy as well.

Fortunately for you, several lenders offer used car loan value options for those who are looking to buy a car. The loan value of used cars in the market is flourishing despite the fact that the present economy is floundering. In fact, cars numbering to more than a million come off lease each year. That leaves car buyers like you with tons of 2 to 4-year-old vehicles to make your selection.

However, before you go ahead and apply for a used car loan, it’s best if you understand a few things about loan value.

How Lenders view Used Car Loan Value

First of all, in auto financing, lenders focus more on the loan value of a used car than on the vehicle itself. The loan value of a car depreciates over time. The older the car is, the lower the loan value is going to be.

The loan value of a used car is generally lower than the purchase price of the car. So if you purchased your car for $21,000, after a few years, its loan value would only be around $14,000.

If you know what the loan value of your car is and compare it with the purchase price, you should be able to come up with a figure, which is the amount you’d have to play with when looking for used car loans. Usually, the amount of the down payment that lenders ask is based on this figure. It would be helpful then if you have forehand knowledge of your used car loan value.

Used Car Loan Value: Other Benefits

Aside from giving you a rough estimate of your down payment, used car loan value can also save you time and trouble. The loan value of your car gives you an idea of your price range when you shop for an auto loan. You no longer make the mistake of applying for a loan that is well beyond your budget. You also avoid getting short-changed on a car that is less than what you can really afford.