Financial Blog

Buying a car is an exciting milestone, but deciding between a new or used vehicle can be a challenge—especially when it comes to financing. Whether you’re eyeing a brand-new model or considering a pre-owned option, understanding how car loans differ for each can help you make an informed decision. 

Loan Terms

New Car Loan: Lenders typically offer longer repayment terms for new cars, ranging from 12 to 60 months or even longer. While this can lower your monthly payments, it may also mean paying more in interest over time.

Used Car Loan: For used car loans, the loan amount can go up to 70% of the appraised value, with maximum terms of up to 48 months. Interest rates depend on factors such as the vehicle’s age, condition, and market value, making them slightly higher than new car loans.

Interest Rates

New Car Loan: New car loans typically come with lower interest rates because they are considered less risky for lenders. On the other hand, used car loans may have higher interest rates due to the depreciation and potential wear and tear of the vehicle.

Used Car Loan: Used car loans may have slightly different terms, with interest rates depending on factors such as the vehicle’s age, condition, and market value. Generally, used car loans have higher rates due to the additional risks associated with older vehicles. However, they often come with shorter loan terms compared to new car loans.

Down Payment Requirements

New Car Loan: Some lenders may require little to no down payment for new cars, especially if you qualify for special financing deals. However, making a sizable down payment can help reduce your monthly payments.

Used Car Loan: SBC Auto Loan actually requires 30% DP for Used Cars  while standard DP for New Cars is typically at 20%

Depreciation Factor

New Car Loan: A new car begins to lose value the moment it leaves the dealership, with depreciation happening at a much faster rate—especially within the first few years. This can lead to negative equity, where the remaining loan balance exceeds the car’s current market value. If you plan to sell your car down the line, this steep depreciation may not work in your favor.

Used Car Loan: Since used cars have already undergone their most significant depreciation, their value decreases at a much slower rate. This makes them a more financially stable option over time, helping you avoid the risk of negative equity and potentially leading to better resale value in the future.

Insurance Costs

New Car Loan: New cars typically require comprehensive insurance coverage, which includes collision and liability protection. This type of coverage includes collision, theft, and liability protection, which gives you peace of mind—but also comes with a higher price tag. Insurance companies charge more for new cars because they’re more expensive to repair or replace.

Used Car Loan: Insurance for used cars is generally more budget friendly since the vehicle’s value is lower. You may also have more flexibility in choosing coverage options. Some lenders won’t require full coverage, which can help you save even more.

Which Car Loan is Right for You?

• Choose a New Car Loan if: You want the latest features, lower maintenance costs, and lower interest rates.
• Choose a Used Car Loan if: You want a more budget-friendly option, lower insurance costs, and less depreciation.

Make your car financing experience smooth and affordable with Security Bank’s Auto Loan. Apply now and get exclusive perks and rates. Also, you can make use of the bank’s Auto Loan Calculator to compute which one best fits you the most, used or new.