Used car prices soar, breaking 10-year record
Unless you live in a big city with an extensive and reliable public transport network, you probably need a car to get to work, run errands, and, well, just run.
Now you probably know that you can save a lot of money by buying a used car rather than a new one. But these days, your savings may be less than you expected.
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Used car prices rise
In the past 12 months, used vehicle prices have jumped nearly 10% to mark the largest increase in more than a decade, according to the U.S. Consumer Price Index.
The reason? Limited supply and high demand. Many people stopped using public transport during the pandemic due to safety concerns and rushed to buy cars instead. In fact, Cox Automotive estimates that the demand for used vehicles has doubled since March 2020.
Additionally, during the pandemic, many Americans faced loss of income and experienced some level of financial insecurity. As such, consumers have been looking for used cars rather than new cars for the savings involved, and now there isn’t much on offer to choose from.
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How to finance a used car
If you’re looking to buy a used car but can’t afford one, you’ll need to finance it. And in this regard, you have options.
First, you could take out a personal loan to buy a car. Personal loans allow you to borrow money for any reason and usually come with competitive interest rates, although the higher your credit score, the less likely you are to pay interest.
Second, you can take out a regular car loan where the vehicle you buy is used as collateral for that loan. Personal loans, on the other hand, are unsecured – no specific asset is used as collateral for them.
So what is the best choice?
Well, a personal loan can have a shorter repayment period than a traditional car loan, which leaves you with higher monthly payments. If you can balance those payments, that might not be a problem, and you might be able to get rid of that debt sooner.
But if you are already using your budget to buy a used car, then a traditional car loan may be a better bet.
Also, you might be eligible to borrow more money with a regular car loan because, as mentioned, that loan is secured by a specific asset – the car you are buying.
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Of course, whatever type of loan you decide to get, it’s a good idea to compare rates so you end up with the best deal. And also, if you can work on improving your credit score before you apply, you might put yourself in a position to save money on interest.
Unfortunately, used cars are more expensive today than they were in the past. If you need a vehicle, be sure to weigh your financing options carefully so that your car fits your budget perfectly and doesn’t cause stress.