How do I get a car loan for a used car?
Where to shop for a loan
Start with your current bank or credit union—they often offer competitive rates, especially if you have a relationship with them. Online lenders and peer-to-peer platforms can also provide quotes quickly. Dealership financing is convenient but may come with a higher rate, as dealers sometimes mark up the lender's rate.
Getting preapproved before you shop gives you a clear budget and bargaining power. It also speeds up the process once you find a car. Just be aware that multiple credit inquiries within a short window (usually 14–45 days) are typically treated as one for scoring purposes, so you can shop around without a big hit.
- Banks and credit unions
- Online lenders
- Dealership financing
- Peer-to-peer lending platforms
What lenders look at
Lenders consider your credit score, income, debt-to-income ratio, and the car itself. For used cars, they often have limits on age and mileage—many won't finance a car older than 10 years or with over 100,000 miles, though some specialty lenders will. The loan term is usually shorter for used cars, often 36 to 60 months, and the interest rate is typically higher than for a new car.
A larger down payment can help you qualify and reduce your monthly payment. It also reduces the risk of being upside down (owing more than the car is worth). If you have poor credit, consider a cosigner or a buy-here-pay-here dealer, but be wary of very high rates.
- Credit score and history
- Income and existing debts
- Vehicle age and mileage
- Down payment amount
Common mistakes
- Only getting financing through the dealership and not comparing rates from other lenders.
- Not checking for prepayment penalties or other fees that can increase the loan's cost.
- Borrowing more than the car is worth, which can lead to negative equity if you need to sell.
