Did you know? The interest rate for used cars is higher than for new cars.

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If anyone has ever experienced buying both new and used cars, they would know that the interest rates for new and used cars are quite different. The difference is that used cars actually have a higher interest rate than new cars!

By now, many of you might be wondering why buying a used car comes with higher interest rates than a new car. Motorist will explain...

Cars are assets that depreciate significantly. Especially for used cars, the depreciation rate is even higher. If one day the borrower defaults or the car gets repossessed, the finance company will incur even greater losses. This is because when the finance company resells the car, it will fetch a lower price than the amount lent to the borrower.

Moreover, most borrowers who decide to buy used cars tend to have a low credit score, such as a history of late payments for more than 90 days. This increases the finance company's risk of non-payment. As a result, most finance companies charge a higher interest rate to compensate for the risk of default.

In summary, the reason why used car interest rates are higher than new car rates is due to the various risks that finance companies must bear. These include the daily depreciation of the car's value, the car's condition, which may not be fully verifiable, and the uncertainties of the car market.

Therefore, if you plan to buy a used car, you should compare interest rates from various financial institutions to find the most favorable rate. But don't forget to also consider other factors such as the car's condition, its maintenance history, and the warranty period to ensure you're getting the best value for your money."

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