Measuring Pros And Cons Of Used Car Loans, Small Down Payment But High Interest Rates

Used car credit illustration (Photo: Pixbay/Tumisu)

YOGYAKARTA – It seems that people's desire for used cars is still quite high. Based on Carsome data, sales of used cars in the October-December 2022 period increased more than five times compared to the previous year in the same period.

On this basis, many financial institutions offer credit system financing to buy used cars. So what are the advantages and disadvantages of a used car loan?

Advantage and Disadvantage of Used Car Loans

One of the advantages of a used car loan is an affordable down payment (DP). That way, you can take a used car home from the dealer even if you have a limited budget.

However, the disadvantage is that the price of used cars will become more expensive because leasing charges consumers interest.

Furthermore, here are the pros and cons of buying a used car on credit.

Advantages of Buying Used Car

Apart from having an affordable down payment, here are some of the advantages of buying a used car on credit:

1. Can choose a car according to your budget

It is undeniable that the budget is the main point of the benefits of used car loans.

The reason is, the DP value, time period, and interest rates can be adjusted to your financial condition. That way, you can manage your finances better.

It's not enough to stop there, you also don't need to spend a very large amount of money at one time.

2. More variety of choices

Besides being able to choose the price at will, the used cars available at dealers are also very diverse. You can get the latest car at a more affordable and pocket-friendly price.

3. Can be taken home immediately

When buying a used car on credit, you can immediately take the targeted used car home even though the payment has not been paid off.

Buying a used car on credit is a shortcut and the right solution if you need a car as soon as possible.

4. Easy Requirements

The next advantage of used car loans is the terms and the easy process. You only need to prepare a number of files that will later be used as collateral when applying for credit.

Disadvantage of Used Car Loans

It has been mentioned above that used car loans also have some disadvantages. Apart from increasing prices, here are some of the disadvantages of buying a used car on credit:

1. The condition of the car is not prime.

It is undeniable that the physical condition of used and new cars is very different. In addition, there is still a guarantee for damage from the manufacturer so that if the car is damaged, the manufacturer can repair it immediately. It's another case if you choose a used car where the condition and performance are below the new car.

2. Higher interest rates

Even though you benefit from a more affordable down payment, the disadvantage of a used car loan is that the interest rate charged by a bank or credit financing institution will be higher than the interest rate for a new car.

This is because used cars are more at risk of damage than new cars.

3. Insurance

Used cars have more potential for damage, so you need insurance so you don't fall short in the future. Unfortunately, not all used cars come with insurance.

However, if you apply for credit, you don't need to worry about car damage because the damage which totals more than 75 percent will be borne by the leasing.

This is information about the advantages and disadvantages of used car loans. Hopefully this article can add insight to loyal VOI.ID readers.