Don't Get It Wrong: The Key Differences Between Used and New Car Loans

Used car loans get you a used car, and new car loans get you a new car. That is surely the first answer to the question of how used and new car loans differ. But the difference goes further than that. There are other differences that affect many things, especially the down payment (DP) and the installment tenor. Used and new cars are essentially the same in function, especially if the vehicle is used for business. But when it comes to lifestyle, new cars are more popular, since lifestyle is closely tied to ‘gengsi’ (social prestige). As mentioned at the start, the difference between used and new car loans lies in the down payment and the installment tenor. Let’s break them down one by one. The down payment on a used car loan is larger than on a new car loan. The DP for a used car is generally 30% of the price, while for a new car it ranges from 20% to 25%. Why is the down payment on a used car loan higher? This is due to its secondhand (literally ‘second hand’) condition. A secondhand car carries a higher risk than a new car, especially with regard to spare parts. Interest rates on new and used car loans also differ. In general, the interest rate on a new car loan is 3% per year, while the interest rate on a used car loan can reach double that, or 6%. The size of car loan installments depends on the interest rate set by Bank Indonesia (BI). Financing institutions and finance companies follow this policy, and they also have their own policies for setting their interest rates. The terms of a loan also depend on the financial condition of the finance company. That is why it is very important to choose the right finance company or lender to get a loan with a low interest rate. For example, CSULFinance offers financing with light installments and easy requirements. For both used and new car loans, the tenor is also very important to consider. It must be weighed carefully, since the tenor will largely affect your financial condition in the future. In short, the longer the installment tenor, the more money you will have to pay. Meanwhile, cars are items that inevitably lose value as they age. READ ALSO : Think About This Before Choosing a New or Used Car Loan.