Used car loan is a financial service where the loaner of a used car purchases the car very cheaply than its selling price. The borrower pays back a certain amount in installments but not exceeding the whole selling price. The cost of a used car loan is low because there are no fixed costs when it comes to purchasing and reselling cars. It also helps to incentivize used-car sales by offering lower borrowing rates for vehicles that have been on the market for longer periods of time.
The benefits of used car loan
1. Lower interest rate
The interest rate on a used car loan is much lower when compared to buying a new one. One reason for this is that the borrower has already paid tax on the car and it cannot be taxed again.
2. Save money
Lowering the interest rates on used cars helps to save money for people who are in need of transportation but do not have much money to spare especially those who are working and living in rural areas where jobs are scarce. The low-cost nature of the loan also makes it an attractive product for people who do not have good credit score but would like to own a vehicle anyway.
3. Helping local economies
Government agencies are very much interested in the resale value of used cars and encouraging people to buy used cars. Used car loans have become a popular way to help boost their local economies. Rather than buying newly manufactured cars, people can buy second-hand ones which they can pay off in installments. The government has also started programs which offer tax rebates for buyers who choose second-hand cars.
4. Boosting the second hand market
There are now many websites that sell only second-hand vehicles at a very low price. These cars are owned by individuals and not manufacturers which means that the prices of these vehicles tend to be cheaper. The newly introduced used car loans are seen as a great way of boosting the second-hand market especially in rural areas where poor people do not have enough funds to buy new cars.
5. Improving car industry’s sales forecast
Used car loans and discounts also boost car sales as they help individuals who cannot afford new cars purchase them at a more affordable price. Car manufacturers now use second hand markets to calculate their forecasts and estimates for future production and sale.