When it comes to cars, it is known that the used car market in Nashville is cheaper that the brand new Market. Pre-owned vehicles in the Nashville area have become a natural choice for individuals in need of a means of transportation but cannot afford to splurge on an New automobile. However, buyers who are interested in pre-owned cars should know that while used cars are indeed less expensive in the Nashville and surrounding areas than new cars, this does not mean that they have less interest to pay. On the contrary, used cars come with higher interest.
Many first-time used car buyers are surprised when they discover the truth about Nashville auto loan rates. What all car buyers should know is that when they decide to purchase a pre-owned vehicle with an auto loan, they would be paying higher interest rate than the traditional 0% or 1.9% new car rate. While new cars are more expensive, the interest rates for new car loans are lower.
What is the reason behind the difference? Actually, there is more than one reason why Nashville auto loan rates are higher than those of Nashville new car loan rates. The first reason is depreciation. Unlike wine which gets better with age, vehicles gradually lose their value after they are purchased. The intrinsic value of the vehicle decreases with age, wear and tear and sometimes, because of market conditions. Even if car owners take good care of their vehicles, the automobiles are bound to depreciate—unless they are the rare or classic type. Because the pre-owned vehicles already have decreased value, it would take some effort for the finance manager to get financing for it. High used auto loan rates compensate for such effort.
Another reason why used auto loan rates are higher is because dealerships often spend more money on vehicles on top of the amount spent in the trade-in process. Dealerships want to get back what they spent, and they can do so by charging higher interest.
While auto loan interest rates for pre-owned vehicles are naturally higher, this does not mean that buyers would just have to endure the high cost that come with borrowing money to pay for a used vehicle. Buyers who opt for secondhand cars can reduce their expenses by choosing the right dealer or lender. Banks offer competitive rates for used Nashville car loans, but credit unions and online lenders have the lowest rates for used vehicles in and around the Nashville TN area. Used car buyers who want to make the purchase through financing can therefore apply for auto loans at credit unions and online lenders to lessen their expenses.