How does the age of a used car affect the loan eligibility and interest rate?

The age of the used car is an important consideration with respect to loan eligibility and the interest rate provided. Lenders typically want to finance cars that are not old because newer vehicles typically have a higher resale value and are less likely to need major mechanical repairs during the term of the loan. Most lenders specify a maximum age limit for the vehicle at the end of the loan term. For example, if a lender has a maximum age limit of 10 years, a car that is five years old would be eligible for a five-year loan, whereas a vehicle that is nine-years-old, would only be eligible for a one-year loan.

Older vehicles are seen as higher risk for many reasons, most of which are related to mechanical issues and depreciation. Risk is reflected in a higher interest rate for older cars and possibly less money financed, with a higher down payment required of the borrower. In fact, vehicles over a certain age may not be eligible for financing.

Consult the lender’s policies before you apply for a used car loan about vehicle age. Picking an eligible car with the ideal age will increase your chances of approval as well as earn you ideal financing terms.