A row of used cars at a dealership on a sunny day.

How to Finance a Used Car and Save Money

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When purchasing a car, opting for a used vehicle instead of a new one can be a savvy financial move. Used cars are often more affordable than new cars, making car ownership more accessible. However, many car buyers considering a used car
will likely still need to finance the car to afford it, and while the financing process for a used car is similar to that of a new car, there are a few key differences to consider. So, in this article, we’ll walk you through the process of securing a used car loan, discuss various financing options, and provide insight on how to make the most cost-effective decisions to ensure that you get the best deal.

Getting the Most Out of a Used Car Loan

Before shopping for a used car loan, it’s important to take some time to follow steps to improve your chances of getting the best loan possible.

Check Your Credit Score

Your credit score is a major factor that lenders will consider when determining your interest rate. Knowing your credit score and taking steps to improve it, where possible, can be a great move to save you money in the long term.

Some creditors and credit monitoring services may offer complimentary reports while others charge a fee to access this information. Here is a list of available resources to use when checking your credit score

Determine Your Budget

As with any major purchase, buying and owning a used car can significantly impact your budget, so before taking on this new responsibility, it’s important to look over your income and expenses to see what you can afford. Be sure to consider both up-front costs (like your down payment and sales tax) and other recurring expenditures like vehicle registration fees, monthly payments, insurance premiums, and so on.

Additionally, applying for preapproval before shopping for a car may be helpful. This can make it easier to compare offers, allow you to negotiate for better terms with your dealer, and help you better determine what you can afford, setting you up better to save as much as possible.

Check the Vehicle History

Companies like Carfax provide vehicle history reports, which can help you get an up-to-date picture of any significant repairs or incidents a car has gone through. Although these reports may not show the whole picture, they can help ensure that the vehicle you’re purchasing is in relatively good condition and has no major underlying issues.

A mechanic looks at the undercarriage of a vehicle with a flashlight while holding a tablet. Used car repair costs can make some purchases more trouble than they’re worth.

Factor in Potential Maintenance Costs

If you plan to buy an older vehicle, you may be able to save significant money upfront with a bit of research ahead of time. Used cars generally require repairs sooner than newer ones, and while every vehicle will need a tune-up eventually, repairs are often cyclical. By researching beforehand and getting a comprehensive vehicle history report, you can better determine if the car you are considering is approaching a major repair requiring an additional investment.

It’s also a good idea to choose a vehicle known for its reliability. The older the car is, the higher the likelihood it will need more frequent maintenance. But, if you opt for a car known for its reliability, you can limit your costs over the vehicle’s lifetime, making the purchase more worthwhile.

How Long Can You Finance a Used Car? Consider Your Loan Terms

When considering financing a used car, one of the most important factors to think about is the length of your loan term. The duration of your loan can affect both your monthly payments and the total cost of the car in the long run. If you opt for a shorter loan term, you may have to make higher monthly payments, but you may also pay less interest overall since you pay off the vehicle more quickly. Conversely, a longer-term car loan may give you lower monthly payments, but it may also lead to more interest charges over time.

One crucial point to keep in mind when choosing a long-term auto loan is negative equity. Negative equity refers to a situation in which you owe more than your asset is worth. This can be a common issue for some car buyers since, in most cases, cars decrease in value as they age.

It is generally advisable to avoid used car loans that last longer than 36 to 60 months unless necessary and to search for the best used car loan rates. Most dealers will offer financing through a third-party lender, which can simplify the process; however, you may secure a better rate from another financial institution if you do your own research. Consider traditional lenders like banks, credit unions, and various online lenders to get the best options available.

A used car with a “For Sale” sign posted in the back window.

Trade in Your Old Vehicle (Unless…)

When you’re looking to trade in your old vehicle, most dealerships will offer a higher trade-in value if you sell it for another car they have in stock. This is beneficial in several ways, as it can help you save money on a new purchase and make the trade-in process less complicated for you.

However, it’s important to remember that dealerships may not always provide the best deal for your vehicle. Sometimes, you can make a much better deal by selling your car to a private party. Although it may require more effort on your part, depending on your situation, it could turn out to be the more advantageous option before you buy a car.

Make a Larger Down Payment

Another approach to shorten the term of your loan and reduce your monthly payment is to make a larger down payment at the beginning. While a down payment of at least 20 percent is recommended, it’s not always feasible, but it’s a good idea to try to save up at least 10 percent if you can.

Moreover, this can benefit individuals with lower credit scores by making it easier for them to borrow. Since you’ll be borrowing less, it increases your chances of approval, which may also result in lower interest rates.

Do Some Online Research

The process of buying a car has evolved over the years, and purchasing a vehicle online, which was once considered risky, is now a smart way to save money. It’s important, though, to be cautious when choosing an online marketplace. Stick with reputable resources like Carvana which allow you to browse a wide selection of vehicles from across the country and complete the entire purchasing process online.

If you still prefer the traditional route, doing some research online before visiting a dealership can help reduce the pressure that comes from interacting with a salesperson. Most dealerships list their inventories online, which can allow you to browse their available stock and have a clear idea of what you want before you arrive.


Purchasing a car is a significant financial commitment, but used car financing can make the path towards car ownership a little easier. To ensure success, examine your options, take your time, and conduct thorough research. This will make it easier to obtain a loan effectively when you’re ready to make a purchase. By understanding the available loan options and getting the assistance of a financial expert you trust, you can better navigate the used car financing process, making your journey towards your new-to-you car a more rewarding experience.


The information and materials provided on this website are intended for informational purposes only and are not specific legal or financial advice for your situation They should not be treated as an offer or solicitation of credit or any other product or service of Regional Finance or any other company, or a guarantee or warranty of any specific results. This website may contain links to websites controlled or offered by third parties. The inclusion of any third-party link does not imply any endorsement by Regional Finance of the linked third party, its website, or its product or services.

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