To save money, should buy a second-hand car with finance? Compare New and Used Car Loans

Buyers can compare new and used car loans for any savings by buying second-hand, using a Car Loan Calculator to estimate payments. The current economic scenario has interest rates rising following recent Reserve Bank cash decisions and the possibility of increased inflationary pressure on cash flow and budgets. Both businesses and individuals may be feeling the pinch. When needing to upgrade their vehicles, a priority for many will be seeking any way to save on their purchase.

Will savings be found in the finance for a second-hand rather than a new vehicle? The answer is not a simple ‘yes’ or ‘no’. There are many aspects to be considered as finance on new compared with second-hand vehicles can vary.

Yes, the purchase price of a second-hand model will be lower than the comparative latest model. This lower price should mean the buyer requires a smaller loan. A smaller loan should mean lower repayments. But the repayments will also depend on the interest rate and the term. Rates for used vehicle finance can be higher than for new vehicles. The rate will also depend on individual applications, the type of loan, the lender and the amount of the loan compared with the value of the vehicle. The term can depend on all those factors also. There are many variants to delve into.

We explain the differences between new vehicle finance and loans for second-hand models, what other factors should be considered, and how buyers may save by securing their best possible interest rate and finance offer.  

Compare New and Used Car Loans – Interest Rates

Interest rates on second-hand vehicle finance is typically higher than for new models. How much higher will depend on specifics of the individual application, loan product and lender. When browsing motor vehicle finance rates, understand that lenders will advertise their best rate for new vehicles, not second-hand. The exception being where it is specified that the rate is for used vehicles, such as through a second-hand car dealership.

For a comparison of potential savings based purely on rates, the second-hand model does not offer a savings. But when the size of the loan is factored in, lower with a second-hand model, the repayments may be lower. A smaller dollar figure may be required to finance a used compared with a new model. This may represent a saving to the buyer.

The amount of the loan compared with the value of the vehicle impacts the interest rate offered by lenders. This reflects the downpayment or deposit. No deposit financing is borrowing 100% of the purchase price. This may be approved for some applicants, most generally business buyers and on new vehicles.

No deposit finance represents a higher risk to lenders than borrowing a lower percentage of the purchase price. Resulting in a higher rate than a loan which has a lower percentage of the purchase price. Making a larger deposit on a second-hand vehicle may contribute to a better rate and that sought-after saving.

The type of interest rate should also be considered. A fixed rate loan will remain unchanged over the full fixed term. Variable rates are subject to change and can be higher than fixed rates. While we offer secured vehicle loans at fixed rates, not all car loans from all lenders will. Some can have a variable rate.

If variable rates are increased by the lender in line with RBA decisions, the interest accrued and repayments will increase. Securing a fixed rate loan may represent a savings over the life of the loan, depending on the rate market.

Use our Car Loan Calculator to see how interest rates and loan amounts change the monthly payment.

Compare New and Used Car Loans Features

In addition to considering the interest rate, buyers should consider all features of the lending product. There may be conditions that will impact the cost and some that may represent a savings.

Both new and can be financed with a Secured Car Loan or Unsecured Personal Loan by private buyers and with Lease, Chattel Mortgage or CHP by businesses. Unsecured loans do not require collateral and attract much higher rates which are usually variable.

Secured finance products attract lower rates than unsecured loan. This may be of significance when purchasing a second-hand vehicle. New cars and quality second-hand models are generally accepted as collateral for secured lending products. But some second-hand vehicles may not be considered in good enough condition to be acceptable as collateral for a secured loan. In these cases, buyers will need to finance the purchase with an Unsecured Personal or Business Loan with a higher rate and possibly lower loan limit.

Does the repayment term suit your needs? The term in conjunction with rate and loan amount determine repayments. If savings are seen as lower repayments, buyers will be seeking a loan with terms that delivers a monthly payment to suit their budget. New models typically can be approved for higher loan limits and more attractive terms than second-hand vehicles.

Additional Considerations – New vs Used

The loan amount may deliver a better rate – savings! Consider making a larger downpayment to lower the finance required.

If trading in a current vehicle, dealers may offer a better trade-in price on their new model range rather than on second-hand stock. This trade-in can be used to reduce the price payable and the finance required – savings!

When buying second-hand, buyers should give thought to what the maintenance and repairs on the vehicle may cost over the coming years. Most new vehicles will cost less in regular servicing with many brands offering special deals over the first few years of ownership.

Securing Affordable Used Car Loans

For exact figures to compare new and used car loans, request a quick quote on both models. We have access to many lenders, and our brokers will ensure you have secured you best rate and can realise any savings available on the purchase of your motor vehicle.

Contact a Jade Car Loans broker on 1300 000 003 for quotes to compare new and used car loans.

DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.