How does the resale value of the used car affect loan approval and tenure?

The resale price of a used car plays a large part in determining if your loan application will be accepted and on what terms. Lenders hold the resale price of automobiles in consideration for whether they will want their money back because of a default. Lenders want to know how much a car will sell in the marketplace and are therefore willing to lend more money and have longer repayment terms on cars when they are comfortable with the resale price and the car is more readily recognised in the market.

If you bought a vehicle that has a strong resale price you may be rewarded with:

• Easiest approvals on your loans due to lenders being more comfortable with the future value of the car.
• Possibly higher loan-to-value (LTV) ratios and as a result borrow more on the cost of the vehicle.
• Lower interest rates, as lender risk is decreased.
• Loan terms which allow more flexibility in your monthly payments.

On the other hand, if you buy a vehicle that suffers from poor resale value such as (lesser known brands, older model cars, and cars with higher mileage), lenders will see these vehicles as riskier and may attempt to limit their risk. For example, they could shorten the loan term, insist on more down payment, or decline to lend using the vehicle as security.