Buying a new car is an expensive option. The costs associated with buying a new car are a lot of taxes and other charges apart from the charges that are levied by the lending agency or bank. The charges include road taxes, registration of the vehicle and the permits that are required for every state.
The difference that is present in buying a new car and an old one is the interest rates of the cars. The old cars seem to have interest rates that are higher than buying a new car.
Based on data, the financing costs for used cars are around four points more than the new cars.
|
Credit score category |
Used vs. new car interest rate, percentage points |
|
Deep Subprime (300 to 500) |
6.23% |
|
Subprime (501 to 600) |
6.42% |
|
Non-prime (601 to 660) |
3.78% |
|
Prime (661 to 780) |
2.02% |
|
Super Prime (781 to 850) |
1.31% |
The gap between the financing points of an old and a used card decreases as the credit score increases. But, on average, the used car will cost financing 1% more than the new car.
Used cars are more expensive because they are at a higher risk. They are more prone to accidents or any breakdowns which put the financing company at risk. The risk of the financing company is transferred to the owner in the form of high-interest rates.