Can I Get Financing for Cars Under $10,000?
Buying a car is often a stressful situation, and that’s understandable. It’s a big chunk of change you’re putting towards a vehicle. What’s worse is that it will drop in value over time – essentially, your money ‘evaporates’. So to minimize the hurt, you may be looking at cars under $10,000. But is it possible to get financing for older and/or lower-priced cars?
Yes, it is possible. At CarUP Kansas City, we can arrange financing for most any vehicle you select from our lot. That includes cars under $10,000. However, there are pros and cons to purchasing and financing cars under $10,000. Here are a few:
Cons to Financing Cars Under $10,000
Higher Interest Rates
Interest rates at virtually any lender are based on a risk assessment. Lower-priced cars are usually at least a few years old and could experience mechanical problems more so than new cars with warranty. The lender sees it as a risk; an opportunity for you to walk away from your payments. As a higher-risk vehicle segment, cars under $10,000 usually get financed at a higher interest rate.
Shortened Financing Terms
Because your vehicle choice is already a few years old, most lenders won’t offer 6, 7, or 8-year financing terms. You’ll usually be restricted to four or five years at most, and that can bring your payment higher than you’d expect. It means you’re paying off more of the vehicle in a shorter time frame.
Down Payment Required
To make the numbers work with the lender, a down payment is often required on lower-priced cars. You may be thinking it’s a good option when you’re tight on cash, but a down payment could make even a low-priced car out of reach.
Pros for Buying Low-Priced Cars at the Dealer
Paid Off Sooner
With a shortened payment term and a lower overall cost, you can pay off your vehicle choice sooner. Compared with a new car or a more expensive used car, you could reduce your car payments by several months or years.
The Debt Service Coverage Ratio, or DSCR, helps a lender determine how much of a payment you can afford. A lower-priced car usually comes in with a lower DSCR, making your car loan more likely to happen. At least, it can keep the down payment amount low.
More Money Free for Other Purchases
Lower-priced cars save you money in the long run. That money can be used for other important things in life. You can get braces for your kids. Take that summer vacation you’ve been putting off. Hit the mall for a new summer wardrobe. It’s because you have lower payments and will have your car paid off sooner.
Cars under $10,000 have typically depreciated significantly from their original sale price. At this point, the depreciation slows down. If you take care of your car, its value could stay close to the amount you paid for it – possibly for years. When it’s time to sell, you’ll lose less money on your car.
If you’re shopping for cars under $10,000 in the Kansas City area, check out CarUP Kansas City. We have a great selection of used cars that fit the bill. Plus, we’ll get you financed!