New vs. Used Car Loans: Which One Saves You More Money?

Buying a vehicle is no small feat. It takes a lot of time, effort and research to find a vehicle that works for you and your budget. That’s because, when looking for a new car, there are many factors to consider outside of the vehicle itself.

As a credit union that’s been dedicated to Contra Costa County since 1947, we know what it takes to find the best auto loan. We’ve been helping our members find them for years! However, we also know that not everyone knows the right place to start their search.

One of the things most people search the most for are the best auto loan rates! Rates for auto loans are usually different for new vs. used vehicles, so your loan options may help you decide which type of car to buy.

However, it’s not always as easy as searching “what is the best car loan rate” online. Instead, you have to know the difference between new car loans and used car loans. There are reasons why some auto loans have higher rates or why some have lower down payments.

Used Doesn’t Always Mean Cheaper

It may be shocking, but new vehicles usually have lower car loan interest rates than used vehicles. There are a lot of reasons as to why! Let’s break down why used car loan rates are often higher than new car loan rates.  

First, used cars are riskier investments. Every car will develop mechanical issues over its lifespan, and a used car will likely need repairs sooner than a new one. Eventually a repair will be needed that costs more than the value of the car—hopefully that’s after the loan is paid off, but it’s a risk the lender is taking. Used cars also aren’t covered by Guaranteed Asset Protection (GAP) insurance, which helps pay off the loan if a car is totaled and isn’t fully covered by auto insurance.

That being said, a used vehicle isn’t always more expensive overall. A used vehicle might come with a higher auto loan rate, but the purchase price is usually lower. That means even if you’re paying a higher monthly rate, you’ll still pay less because you don’t need to borrow as much, which can save you money overall.

New Doesn’t Always Mean Better

It’s easy to think that a newer vehicle is automatically a better vehicle. However, there have been plenty of times where vehicles get recalled due to safety concerns or due to faulty equipment. With vehicles that have been on the market for longer, you have a better idea of what to expect. When it comes to a brand-new vehicle, there are unknowns that you’re risking.

Auto loan interest rates for newer vehicles may seem better, but the lower rate doesn’t mean a lower monthly payment. The cost of a new vehicle is usually significantly higher than the cost of a used vehicle. Comparing only the vehicle loan rates doesn’t give you the full picture as to how expensive a new car might be – you have to look at all the factors to know which type of car is right for you and your budget.

Refinancing Means Saving on Your Current Car

The best way to save may be keeping your current vehicle and getting an auto loan refinance.  That’s right – if you’re already paying an existing auto loan, refinancing your car loan might be better for you than starting from scratch!

Compare current auto loan rates to the rate you’re paying. If you see lower rates available, refinancing might be your biggest money-saving move. Credit unions often have special promotions on auto loan refinance rates, so they tend to be lower than auto loan interest rates for purchases. There are several vehicle loan calculators you can use online for free, so finding a good one should be easy!

How To Know What Is Best for You

If you’ve already decided on a vehicle that works for you and you’re now shopping for the right loan or you want to find out how much you can afford, start with an auto loan calculator! Auto loan calculators are great tools that help you compare how much you’d pay every month with various auto loan options.

Another way to make your shopping easier is to get your auto loan preapproved. This way, you know exactly how much you can afford with a good idea as to what your vehicle loan’s interest rate will be.

Knowing what you can afford in advance is one of the best ways to prepare for your new vehicle. Between auto loan calculators and auto loan preapproval, you can go into your car-buying process with confidence and ease.

How To Find the Right Loan

Knowing that neither a used auto loan or a new auto loan is guaranteed to save you money, it’s good to know how to find a loan that fits your needs. Start by talking to trusted professionals! At Shell Western States Federal Credit Union, we know how to help our members find their dream auto loan.

Our team of experienced professionals knows how to get you the best loan in Costa Contra County. With credit union auto loans, you can get a great rate and personalized service. We’re community-focused, and you’ll see that firsthand when you work with us!

Want to know more? We offer a wealth of information on our website. You can check our current loan rates, read more about what we offer and even start loan pre-approval.