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How to finance a used car

November 27, 2023 | 5 min read

In this article

  • Finance a used car with our step-by-step checklist, including checking your credit score and getting pre-approved for a loan.
  • Determine affordability by considering down payments and other ownership costs like insurance, registration and maintenance.
  • Before you buy, research the cars value, check the history report and get an inspection for a smart purchase.

When it comes to financing, there are differences between buying new and used cars. In this blog, we will explain how to finance a used car to help get you ready for your big purchase.

You may already know some pros of buying a used car, like not having to deal with the drastic drop in value that comes with buying a new car (sometimes up to 20% depreciation as you drive off the lot, yikes!). Buying used can also mean lower registration fees and lower monthly payments.

To help you get closer to making a purchase, we’ve created a step-by-step checklist on how to finance a used car.

Step 1: Check your credit score.

Your credit score is the biggest determining factor of what your interest rate will be. It helps potential lenders put you into one of several buckets that range from super prime (highest credit score range) to deep subprime (lowest credit score range).

Step 2: Review your credit report for errors.

It’s smart to get a full copy of your credit report from the three main credit bureaus (Experian, TransUnion and Equifax) to see if you find any discrepancies.

It’s smart to get a full copy of your credit report from the three main credit bureaus (Experian, TransUnion and Equifax) to see if you find any discrepancies.


  • Pay down excessive debts
  • Make payments on time
  • Bring overdue accounts current
  • Make at least the minimum payment on every loan or credit line


  • Don’t start closing accounts (it can actually lower your credit score)
  • Don’t open any new credit accounts right before applying for a loan

Step 3: Determine how much you can afford

Our  car loan calculator  can give you an idea of your payment amount based on the loan term and interest rate. The first cost is the down payment. The more you put down, the less you need to finance, which will lower your monthly payment.

It’s easy to get caught up in the excitement of buying a car and forget the costs that come with it. Factor in the expenses you will incur after the purchase like auto insurance, registration fees, routine maintenance and gas.

Step 4: Get pre-approved for your car loan

Next, contact your lender to get pre-approved for a car loan, which will tell you if you are able to borrow enough to buy the vehicle.

Most car buyers go to a bank, credit union or directly to the dealership to see what their options are. Getting financing through a dealership-arranged lender can be convenient, but don’t forget you can also choose to get an auto loan through your local credit union or bank if you’d prefer to work with them.

Why finance with a credit union

Step 5: Shop around to find the vehicle you like

Now the step you’ve been waiting for—shopping for your car, truck or SUV. Maybe even a hybrid or electric vehicle. After you’ve narrowed your selection down to a few options, follow these tips.

  • Find out each car’s value: Used car values are based on the car’s condition and history. Research a fair price with industry leaders like Kelley Blue Book or Edmunds. Compare similar models for price, reliability and maintenance costs to help make your decision.
  • Look at the car’s history report: Never buy a used car without getting a full vehicle history report to learn the title history, any unresolved safety recalls, a list of previous owners and any accidents the car has been involved in. You can obtain a report from an online company like Carfax.
  • Get the car inspected: A visual inspection can only tell you so much. It’s important to get a mechanic to thoroughly examine the car to diagnose any potential issues.

Ready. Set. Go!

Now that you’ve learned how to finance a used car, it’s time to start tackling each step. If you find yourself getting overwhelmed during the buying process, take a deep breath and remember … there’s light at the end of this tunnel.

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The material presented here is for educational purposes only and is not intended to be used as financial, investment or legal advice.

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