How does the residual value guarantee affect used car loan terms?

Another used car loan consideration that may impact your terms is a residual value guarantee. In simple terms, it’s an arrangement that guarantees the minimum value of your car at the end of your loan. This provides the lender comfort that, no matter what occurs in the market, the car will be worth at least a certain value by the time the loan contract ends.

Since the promise reduces the lender’s risk, you may find they’re willing to lend you more, or let you take longer to repay, or charge you less interest. This is particularly the case with cars that are known to have a high resale value, because the lender feels more comfortable with a strong sense of how much the vehicle will be worth down the line.

Not all used car loans include a residual value guarantee. If this sounds like something you'd be interested in, then inquire with your lender about the terms, and how it would impact your loan. And make sure to read the fine print so you know what to do at the end of the loan if you will have the option to keep the car, trade up to a new one or return it.