Used car loan options come in all types and shapes. The differences in terms and conditions means changes in the interest rates you will be charged. For example, the shorter your loan terms, the lower your rate. A large down payment will also reduce your rates. Buying a used car from a dealership will also reduce your rates. Also, a co-signer with a better credit score will help you get lower rates on your auto loan. Lenders base their credit decision on the co-signer’s score, even though you pay for the loan. This is one way to reestablish your credit history while paying near market loan rates.


If you are looking to get pre-approved, you can also negotiate with the lender about fees and rates. For instance, making automatic payments will reduce your rates with some lenders. You may also want to eliminate any early payment fees in case you choose to sell the car or refinance the loan. It is important to understand the implications caused by even a fraction of percent difference between one rate and another and matters relating to the calculation of interest rates and the impact of interest rates on the eventual repayment of the loan.
While calculating the various interest comparison rates we must take into account every possible fee and charge which could be included in the loan. This enables those who are borrowing money to finance a purchase to be very clear as to which company is actually offering the best rate. Normally, the interest charged for used car loans will be calculated on a daily rate, which means that customers need only take the standard interest rate and divide it by 365 to be able to identify the amount charged per day. This interest will accrue daily and each month will be charged and thereby handing to the total balance due. It is important to be aware of the significant difference that only one or 2% can make when looking for a car loan.

If you have a good credit rating a typical finance rate for used car finance over a five-year period should be around 8.99%, although clearly this is likely to be variable depending upon the general economic situation. However, loans are available for car purchase at anything up to 12.6%, generally for those with a poorer credit record. As usual, those that find it harder to pay are charged the most. Whilst this may only appear to be two or 3% difference, over the course of the five years this represents nearly 6,000 UK pounds more.
You also need to remember that when you buy a new car the interest charged may be either initially or entirely set at 0%. Imagine purchasing a car that is brand new and which costs 10,000 UK pounds. Whilst this may seem too expensive, opting to purchase a used car at around 8,000 UK pounds, even at the very low rate of interest of 7% you would actually still be paying more than the purchase of a brand new car.


If you maintain the payments in full and on time you will not be charged any penalty. However, in case you make late payments or fall behind with your payments, you are almost certain to incur late payment charges. Hence, it is also wise to be aware of the charges that would be incurred should you fall behind with your payments, and ensure that these are not too much.