How is used car financing any different from new car financing? The most obvious thing is the underlying asset – that is, used car financing is something that is acquired to finance a previously owned or leased car (or in some situations, a dealer demo car), and new car financing of course finances a new car.
Given all that, the bottom line from your perspective will be price. Vehicles that have been on the road and have put on some miles will of course have an asking price well below that of the car that just rolled off the production line.
Despite the lower price, one should not equate a previously owned or leased car as necessarily inferior to a new car. Granted, it won’t have the new car smell that brand spanking new cars will have, and it may not have all the new bells and whistles that new cars will be sporting. More than likely, however, the previously owned car, particularly if it is one of those factory certified pre-owned vehicles, will be just as reliable and just as snazzy as one you could buy brand new. In fact, most, if not all certified pre-owned vehicles come with factory warranty. Just think of it as a brand new car that you’ve had for a year or two. Chances are, the certified pre owned vehicle you just purchased is in better shape than one that you would have owned for the same amount of time had you bought it brand new.
Recent studies indicate that approximately 60% of prospective car buyers between the ages 18 and 30 are trending towards used car finance options, and for good reason. A previously owned or leased car is simply not your father’s used car anymore. Used cars can look pretty new nowadays. And, with manufacturers extending the life of each model beyond the traditional four years, a used car’s design may well look fresh and new five even six years after you buy it.
With the economy the way it is, and the skyrocketing price of cars vis-a-vis wage growth, people, particularly the youth will make used car financing one of their top options as they seek financing for their vehicles. No doubt, with the excesses of the past five years, and the increasing reliance of people on leasing, the used car market will be ready for the demand, and the trend for pre owned vehicles will also fuel the rise in demand for used car financing.