Buying a used car can be a great way to save money on your next car purchase. However, used car prices have over the last few years, so there’s a good chance you’ll need to finance your used car to afford it.
That said, before you finance a used car, there are some basic guidelines you should follow to avoid spending more money than necessary. Here they are:
1. Check your credit score
Before you decide to finance a used car, be sure to check your credit score. Your credit score will have a major impact on your car loan terms and your ability to get a car loan in the first place.
For example, the higher your credit score, the better interest rate you’ll get, which can lower the overall cost of the loan by thousands of dollars.
To check your credit score, go to or contact one of the three major credit bureaus: Equifax, Experian, or TransUnion.
2. Get pre-approved for a loan
It’s also a good idea to get pre-approved for a car loan before you start looking at used cars. Why? Because it lets you know how much you can afford—in terms of the loan amount, loan period, and interest rate.
Ask different lenders for quotes and compare them. Once you settle on a lender, you can ask them for pre-approval to show to car dealerships. This will help narrow your choices when choosing a used car to buy.
Alternatively, consider buying from a buy-here-pay-here (BHPH) car dealership. They offer to finance in-house. According to Tiger Okeley at , “BHPH financing eliminates all the back and forth required when getting a car loan from a bank. Buyers can find a car and drive away with it the same day.”
3. Verify the vehicle history and get a car inspection
When choosing a used car, make sure to check its vehicle history and get a professional car inspection. Doing so can alert you to potential red flags.
For example, if a mechanic identifies transmission issues, this could mean costly repairs down the line. Plus, you’re more likely to end up on your car loan, i.e., owing more than the car is worth.
To check a used vehicle’s history, request a car history report from a service like or run a through the National Insurance Crime Bureau (NICB).
4. Make a big down payment
Make as large a down payment as possible. This can reduce the monthly payments, the loan term, and even the interest rate—all of which can make a huge difference in how much you’ll pay over the lifetime of the loan.
5. Try to pay other loan fees in cash
Most car loans come with fees attached to them, such as loan origination fees and documentation fees. Instead of rolling these into the car loan, try to pay for them in cash. This will lower the amount of interest you owe in the long run and can help you pay off the loan faster.
6. Get a cosigner
If you have poor or zero credit, consider having someone cosign the loan for you. By getting access to their credit history, you may be able to get better loan terms.
7. Avoid long-term car loans
It can be tempting to opt for a longer-term car loan since they require lower monthly payments. However, the longer the car loan, the more you’ll pay overall. Longer car loans create more time for interest to accrue and often require higher loan interest rates as well.
So keep the car loan term as short as you can, even if it means a higher monthly payment (as long as you can afford it).
8. Factor in maintenance costs
Lastly, it’s important to factor in maintenance costs when financing a used car. Cars (and used cars especially) need regular maintenance. Think about oil changes, tire replacements, and other repairs. If you don’t factor these into your car budget, you could end up unable to keep up with your monthly car costs.
Final word
Ultimately, financing a used car can be a great way to get the car you need. Just be aware of some of the pitfalls and how to avoid them. If you follow the tips above, you’re off to a good start.