What is the reasoning behind a banks%26#039; decision to charge higher interest rates for used cars vs. new cars? It%26#039;s a secure loan anyways. I%26#039;ve always thought that a higher interest rate protects the bank in case u have bad credit because the risk is higher, which I understand totally... but what does a car%26#039;s age or mileage have to do with interest rates? The risk is protected by the loan value.
New Car Finance Rates VS. Used Car Finance Rates?
Actually, they are the same. The promotional deals where you buy a new car for a token or no interest are always in the alternative of taking a cash rebate instead. Forfeiting the cash rebate in favor of a lower interest rate is simply a pre-payment, or buy down, of the real interest rate. The only way to be sure of what is going on is to compare the terms with a financial calculator such as an HP-12C.
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