New vs Used Car Loans: Down Payments, Interest and More
New vs used car loan: compare down payments, interest rates and where you can buy. See how financing a new car differs from financing a secondhand one.
For some people, buying a car is no big problem, especially when their finances are comfortable. When money is not an obstacle, buying is easy. When money is just enough to get by, though, buying a car is hard. That is why a new car can be bought on credit, and some people even finance a used one. So what is the difference between a new car loan and a used car loan?
Down payment
The most noticeable difference between applying for a used car loan and a new car loan is the down payment. For a new car, the down payment is usually 25 to 30 percent. This down payment is the problem when your finances fall short. On top of that come administration fees at the start, and the first installment must also be paid right away.
For a used car loan, however, the down payment can be more than 30 percent. Naturally, that is a much larger amount, and one that works in your favor. That is because the car is secondhand. The risks of buying a used car are higher, though, especially when it comes to its spare parts.
Loan interest
For used car loans, the interest on installments is mostly higher than for new car loans. For a new car, the interest charged is only 3 percent per year. For a used car, the car loan interest charged can reach 6 percent per year.
Why does this happen? The interest rate set by BI (Bank Indonesia, the central bank) strongly affects the size of loan payments across many sectors. This also depends on your own finances. Beyond interest, the payment on a car loan will also include an insurance premium.
Where you buy
A used car can be bought on credit from a dealer or from a private seller, which gives buyers more freedom to look for a car. A new car loan is different: it can only be arranged through a showroom, a bank or a trusted leasing company.
Those are the basic differences between new and used car loans. In the end, though, it all comes down to your decision.
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