Can I Finance an Older Car?

By Chris Hardesty 04/06/2023 4:00pm

Quick Facts About Financing Older Used Cars

The average age of cars on the road is more than 12 years because of the reliability of today’s automobiles.
Used-car demand remains strong, despite average prices higher than $26,000.
More lenders are willing to consider financing older cars now, because vehicles are lasting longer than in earlier generations.

As the quality of cars steadily improves, so does the average lifespan of vehicles.

With the longer lifespan, not only do private owners sell such high-mileage cars, but some dealerships offer them, too. If you’re looking to purchase an older car, will securing a loan be possible? Read on to learn about getting an auto loan for an older used car that still has some good years remaining.

Auto Loans for Older Cars With High Mileage

Some lenders have become more lenient with their loans for older cars. This doesn’t mean that you will qualify for thousands of dollars for a loan when trying to finance an older automobile. But it’s much easier to find financing for a new-to-you car that’s more than a few years old.

Some banks, including Santander, and most credit unions will consider loans on used vehicles.

Bruce Jackson, head of the Santander US Auto business and CEO of Santander Consumer USA, said the company “is always looking to offer competitive auto loan rates on used cars for our qualifying customers.”

He added, “In today’s market, where used cars are more plentiful than new vehicles, financing older models is a necessity that we are happy to provide and have provided for years to meet the needs of our customers. This includes offering financing for used vehicles within nine years of age, in accordance with our general vehicle policy.”

What Is the Average Age of a Car?

According to automotive data in a 2022 study, the average age for cars on the road is 12.2 years old, the highest ever recorded.

The reliability of cars today is only a portion of why we see people driving older vehicles. The pandemic and a chip shortage caused new and used car prices to spike to unseen levels. So buyers typically going after late-model used cars now may consider older used vehicles.

What Is Impacting the Market for Older Cars?

The S&P Global Mobility Report says that improvements in quality across the automotive industry mean carmakers are manufacturing more reliable cars that stay on the road longer. This has been a major contributor to the rising age of vehicles today. However, the COVID-19 pandemic significantly impacted the rising age of vehicles.

The auto industry took a hit during the height of the pandemic, but the after-effects have shaken up the market. The global microchip shortage also caused a lag in the number of cars produced. With fewer cars produced, demand goes up, and supply goes down.

Changes in supply and demand caused new and used car prices to skyrocket as dealers struggle to stock cars. Americans paid record amounts for new and used cars last in 2022, when used car prices topped more than $28,000 for the first time in January. Prices are trending downward, but the average price tag for used cars is still around $26,000 at the time of this writing.

Financing for High-Mileage Cars

Financing a high-mileage car is not a hassle like it used to be. Lenders are open to financing older cars since they tend to withstand the tests of time. While financing may be available through a dealership, local bank, or credit union, it’s best to know what you can afford and shop around for the best interest rate. Use our car calculators to crunch the numbers to see how much you can afford to pay for a used vehicle.

Banks and credit unions can help you along your car buying journey. However, unlike banks, credit unions are owned by their members, not shareholders. This allows credit unions to offer lower interest rates to buyers looking to finance a vehicle.

Credit Union vs. Banks

Dawit Kebede, a senior economist at the Credit Union National Association in Madison, Wisconsin, said credit unions provide about a quarter of the financing for used cars in the industry. This represents 64% of the total vehicle loans by value from their portfolio. As a result, credit unions can be a critical source of financing for consumers looking to buy affordable used cars that fit their needs.

“The shortage of semiconductor chips in this pandemic which resulted in the lowest inventory of new vehicles at dealerships led to a large volume of used car loan origination at CUs,” Kebede said.

Ensure that you know your credit score before arriving at any bank, credit union, or dealership to ask for a loan. If not, you will likely need to put down a larger down payment.

Of course, a potential borrower needs to be a member of the credit union that administers the loan. Similar to traditional banks, it’s as simple as opening an account. And remember to check the vehicle history report early in the shopping process. You should also consider scheduling a car inspection at a reputable auto repair shop.

Editor’s Note: This article has been updated since it was originally published. Rick K