Generally speaking, the interest rate for new car loan is lower, while the interest rate for used car loan is relatively higher. This is because new cars have a stronger value retention, and financial institutions are optimistic in risk assessment, so they lower loan interest rates. However, used cars have a longer service life and depreciate faster, so financial institutions bear higher risks and therefore have higher loan interest rates.
New car loan usually higher loan amounts, as the lending bank or financial institution has a higher mortgage value assessment for new cars, and can usually lend 80%-90% of the car price. Second-hand car loan, on the other hand, are affected by the age and condition of the car, and the loan amount is generally lower, usually at 60%-80%.
It is usually easier to loan for a new car because the quality of the new car is guaranteed and the risk to the financial institution is lower. In addition, the market value of a new car is higher, financial institutions are optimistic about its collateral, and the approval process is relatively simple. In contrast, the approval process for a used car loan is complicated. Banks will require a valuation of the vehicle, and vehicles with poor age and condition may not be approved for a loan.
Scenarios for choosing a new car loan
Higher : If you have enough to pay the down payment and want a high loan amount and low interest rate, a new car loan is a suitable choice.
Want to discounts: New cars usually come with discounts, such as free maintenance, longer warranty period, etc.
Plan to use the car for a long time after purchase: New cars have strong value retention, suitable for long-term holding, long loan period, and relatively light monthly payment pressure.