Where To Find Financing For a Used Car
Even though you are saving money by purchasing a used car instead of a new one, you do not have to pay for the entire purchase price out of pocket. You can take advantage of financing for your used car from a variety of different financing sources. Be sure to compare all of the options available to you before picking the one that offers the best financial outcome for you and your family.
The first place to look for financing for your used car is your used car dealership. Often used car dealerships will provide financing in order to facilitate more sales. Find out what rates and terms are available while you are shopping for your used car. While negotiating the purchase price of your used car is an expected part of shopping for a used car, you also can include negotiating your used car financing. Consider the financial advantages and disadvantages of negotiating for a lower interest rate or longer loan term versus a lower purchase price.
Whether your used car dealer offers financing or not, it is always best to look into as many different financing options as possible so you can find the best rate. Credit unions often offer lower financing rates than banks because they have lower overhead costs. If you are already the member of a credit union, perhaps because of your job, call to find out the current rates and terms. If you are not already the member of a credit union, find out if you are eligible to join one through your employer or residency. You also can ask your relatives if they are. Often credit unions allow relatives of current members to join.
If you own your own home, consider whether you want to take advantage of a home equity line of credit to pay for your used car. A home equity line of credit means borrowing against the equity that you have paid into your home with your mortgage payments each month. The beauty of using a home equity line of credit to obtain the money necessary to pay for your used car is that the interest that you pay on your home equity line of credit is tax deductible.
This means that even if you have to pay Alternative Minimum Tax or see your other deductions phased out due to income, you are likely to still be able to deduct interest that you pay on your mortgage or home equity line of credit. As a result, the interest rate that you are paying on your home equity line of credit is not the true cost of financing the purchase of your used car. Instead, the cost of obtaining financing for your used car is reduced by the tax savings that you will benefit from when you deduct the interest that you have paid throughout the year on your income tax return. This only applies if you itemize your deductions on your tax return, however most individuals who pay mortgage interest itemize their deductions.