Financing on 10 year old car?
August 18, 2011 8:12 AM   Subscribe

Best way to get a loan for an 8-10 year old car? My bank won't finance anything over 7 years old, and I'm not sure I trust dealer financing.

I'm looking to only spend $5-6k on a car, so most models newer than that are a no go.
posted by tonyx3 to Travel & Transportation (9 answers total)
Your distrust if well-placed. Try a local credit union. There are some online sites that help you find financing, such as
posted by allen.spaulding at 8:22 AM on August 18, 2011

Relevant: how's your credit? How much of a down payment can you make on this $5-6K car? How long do you hope to take to pay it off?
posted by jon1270 at 8:30 AM on August 18, 2011

Dealer financing will be through a bank or other financial institution. There's nothing wrong with it if you go in with your eyes open. I have always had a pre-approval from my credit union before car shopping. The dealer has sometimes managed to find a loan that beat them. If you don't have anything to compare their offers to, understand what your credit rating is and what APR you should qualify for. This will vary depending on the term of loan you're looking for, right now with good credit I'd expect 3% for 24 months up to about 5% for 60 months.
posted by IanMorr at 8:32 AM on August 18, 2011

right now with good credit I'd expect 3% for 24 months up to about 5% for 60 months.

Even now, I think that's realistic for a new car, but a bit optimistic for a used car, especially one that old.

But yeah, there's nothing inherently wrong with dealer financing itself, it's that dealers are generally pretty slimy. Assume that they're screwing you somehow, and pore over the details of the loan accordingly. Focus on the amount financed AND the interest rate AND the term. Run the numbers yourself and check the monthly payment they're quoting you.

Many times, say the car is $8,000 sticker. Dealer says "Can you swing $200 a month?" "Sure," you say. Well the write up the lease for $10,000 and stretch the term out to however long it takes to get down to $200/month, and then add on a few more months. It's all gravy for them. People get focused on This is how much I can afford each month instead of This is how much I'm willing to pay for a car.

I rode along with a friend that was shopping for a used car. He'd pretty much decided on about a $6,000 Civic, dealer tried to upsell him into an Accord for $10,000 "for only $20 more per month!" well, yeah, and 24 more months. When you figure it all out, they would have totally boned him.

Keep your eyes open, don't let yourself get rushed into anything. And if you don't understand how financing works, bring a friend who does and treat them to lunch.

Having said all that, $5-6k seems a little steep for an 8-10 year old car, at least around here. Here in NW Washington, very reliable cars 5-7 years old can be had for $4-5k, which is a big difference in price and in age. Are you looking solely at dealers, or are you looking at private sellers too? As long as you do your homework, you can usually get a much better deal from a private seller or by searching the local Auto Trader magazine.
posted by xedrik at 8:42 AM on August 18, 2011

Dealer financing is not always a scam. I've used Honda financing for my last two cars, and Ford financing the time before that, and it was totally on the up-and-up. I don't about used-car dealers though.
posted by cabingirl at 8:49 AM on August 18, 2011

The problem is that older cars are much more likely to become scrap before they're paid off. Auto loans' low interest rates and easiness to get depend on the bank's confidence that the car will continue to have value as collateral. If your bank and/or credit union won't give you a loan, it's because their loan products are not tailored for high-risk situations. Some dealers cater to people in your situation, but they do it by financing with loans that have worse terms and higher interest rates. The dealer can't wave a magic dealer-wand and make your situation better than it is; they'll just sell you a product (the loan, not the car) that the bank won't mess with. You might consider either buying a really cheap car you can pay cash for, or financing a more expensive one in a smarter way.
posted by jon1270 at 8:59 AM on August 18, 2011

I believe PenFed will finance cars up to 100k miles at 2.49%. I've used them for a new and used purchase with absolutely no problems.
posted by getawaysticks at 10:21 AM on August 18, 2011

Response by poster: Thanks for the feedback. To respond to some requests, my credit score is above 700, and I can probably put $500-1000 down. I'm specifically looking for a truck or suv, and in shopping the prices around my area (Oregon), what I'm seeing in my price range is vehicles around 10ish years old, and mostly around 100-140k miles, which doesn't scare me any, but my bank won't finance a car that old, so I'm trying to find the best way to get decent terms on my loan.
posted by tonyx3 at 5:45 PM on August 18, 2011

Did you just pick a price range you were intuitively comfortable with, or did you do some calculation? If it was a calculation, how did you approach it? Do you have a monthly payment and/or loan period in mind?

If you buy a $6k vehicle, add in another $800 or so for sales tax, document fees, etc. (I'm from Ohio so I don't know your local particulars), and apply your $1K down payment, you might end up with a payment of $170/mo. for three years. But it seems that $6k isn't enough to get you a truck new enough to qualify for the loan, so consider this alternative: if you were to get a 4-year loan instead of a three-year loan, keeping your monthly payment the same, you can now afford a $7,700 vehicle, which might indeed be enough to get you a 2004 truck of some sort. It will be newer and have fewer miles on it. When the loan is paid off it will be worth more than the older truck would've been, so you'll get more for it if you sell it and it will last longer if you don't. The price will have been higher, but the long-term impact on your financial health might be basically the same, and you'll have been driving a nicer, more dependable vehicle.

These numbers are somewhat speculative since you haven't stated how you arrived at your price target, but I encourage you to play around with the numbers this way.

My standard car buying book recommendation: Don't Get Taken Every Time
posted by jon1270 at 2:58 AM on August 19, 2011

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