Jake Miller
If you're looking to finance a car with over 100,000 miles on the clock, you may encounter some challenges. While it's not impossible to secure a loan for such a vehicle, many lenders have restrictions on car mileage. This is because older, high-mileage cars are considered riskier investments due to their age, uncertain resale value, and higher likelihood of requiring repairs. As a result, you may face higher interest rates and more limited financing options when compared to newer cars. However, some banks and credit unions are becoming more open to financing older vehicles, and certain lenders specialise in high-mileage auto loans. Your credit score and income will also play a significant role in determining your eligibility and the interest rate you'll receive.
| Characteristics | Values |
|---|---|
| Difficulty in financing | Banks are less likely to finance cars with high mileage as they are considered a risky investment. |
| Higher interest rates | High-mileage cars often attract higher interest rates to offset the risk of depreciation and mechanical problems. |
| Alternative financing options | Credit unions, auto dealers, and subprime lenders may offer more flexible financing options for high-mileage cars. |
| Private-party auto loans | These loans are typically available to credit union members or bank customers and may be an option for high-mileage cars. |
| Personal loans | Personal loans from banks, credit unions, or online lenders may be an alternative if auto loans are unavailable or less favorable. |
| Extended mileage loans | Some lenders offer extended mileage loans specifically for older cars or those with high mileage. |
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What You'll Learn
Banks that finance older cars
While it is challenging to find a car loan for an older car, it is not impossible. Some banks and lenders understand that vehicles can last longer than they used to, and so they may be willing to finance a car with over 100,000 miles on the odometer. However, it is important to note that you may have to pay a higher interest rate on these loans, and you may need to shop around to find a lender without mileage restrictions.
One bank that offers loans for older cars is Commerce Bank. They offer flexible terms, rate discounts, and pre-approved auto loans for cars older than seven years. They also finance classic cars, provided they still have value and fit within their collateral guidelines.
Another option is LOC Credit Union, which offers financing for older vehicles and those with higher mileage. However, their loans are currently only available for vehicles located in the state of Michigan.
Some banks and lenders have restrictions on the make, model, and mileage of pre-owned vehicles they will finance. For example, PenFed Credit Union requires automobiles to have fewer than 125,000 miles to qualify for financing.
If you are considering a loan for an older car, it is important to understand the loan terms, monthly payments, and what you can afford. A shorter loan with higher payments may save you money in interest over a longer loan with lower monthly payments. It is also worth considering the potential drawbacks of buying an older car with a loan, as you may end up owing more than the car is worth.
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Higher interest rates
While it is possible to finance a car with over 100,000 miles on it, you may have to pay a higher interest rate than you would for a newer car with fewer miles. This is because lenders consider used cars to be riskier investments, as they have already partially depreciated, have uncertain resale value, and are more likely to need repairs. A higher interest rate helps offset this risk.
The average interest rate for a used car loan is about 12%, compared to about 7% for a new car loan, according to Experian. However, interest rates can vary widely depending on the lender and the borrower's credit score. A higher credit score indicates less risk, which lenders reward with a lower interest rate.
If you are considering financing a high-mileage car, it is important to shop around for the best interest rate and to understand the loan terms and monthly payments. You may also want to consider a shorter loan with slightly higher payments, as this can save you money in interest over a longer loan with lower payments.
It is also worth noting that some lenders have specific restrictions on car mileage. For example, PenFed Credit Union requires automobiles to have fewer than 125,000 miles to qualify for financing, while CarFinance sets the limit at 100,000 miles. Additionally, some banks and credit unions may have more flexible terms for older car loans, so it may be worth exploring these options as well.
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Auto loan vs personal loan
While auto loans are specifically for financing a vehicle, personal loans can be used for almost any large expense. Personal loans are usually unsecured, meaning they are not tied to any assets or collateral, so they often have higher interest rates than auto loans.
Auto loans are generally the cheapest way to finance a new or used car. They are secured by the vehicle, so if you don't make payments, the lender can repossess it to recoup what you owe. However, this also means the lender can place restrictions on the type of vehicle you buy, such as its age and mileage. For example, PenFed Credit Union requires automobiles to have fewer than 125,000 miles to qualify for financing.
Personal loans, on the other hand, offer more flexibility. They don't require a down payment, and there are no insurance requirements to protect collateral. They may be a good option if you are buying an older, high-mileage vehicle, as some lenders won't approve auto loans for cars over a certain age or mileage. Additionally, if you have strong credit and income, you may qualify for a large enough personal loan to pay for the vehicle without needing to make a down payment.
However, because personal loans are unsecured, they are riskier for lenders, so you may need a higher credit score to borrow the same amount of money as with an auto loan. Interest rates on personal loans can also reach triple digits for those with poor credit, making them an extremely expensive way to finance a car. Additionally, interest paid on a personal loan used to buy a car cannot be deducted on your taxes, and defaulting on the loan can seriously damage your credit score.
In summary, auto loans typically offer lower interest rates and are usually the best choice for financing a car. However, personal loans offer more flexibility, especially when buying older or high-mileage vehicles, and may be a better option if you can get a lower interest rate than with an auto loan. It's important to evaluate the pros and cons of each option and choose the loan with the best terms for your specific situation.
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Credit unions
However, credit unions may have their own restrictions. For instance, some credit unions have a maximum model year of 10 years or a 100,000-mile limit. Beyond this, they may offer high-interest personal loans instead.
To get a car loan from a credit union, you'll typically need to be a member. Membership may include paying a small fee of $5 to $25. It's also important to compare options based on the car's age and mileage and to consider the loan term and associated costs.
Overall, while credit unions may offer more flexible options for financing high-mileage vehicles, it's important to shop around and understand the specific requirements and restrictions of each lender.
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Mileage restrictions
For example, PenFed Credit Union requires automobiles to have fewer than 125,000 miles to qualify for financing. Similarly, a local credit union may finance used cars up to 15 years old but restricts the mileage to less than 100,000 miles. On the other hand, a major bank restricts vehicle age to 10 years while allowing up to 125,000 miles.
It is important to note that some lenders may have even stricter mileage limits. For instance, CarFinance requires vehicles to have less than 100,000 miles for borrowers to be eligible for a loan. In such cases, borrowers may need to consider alternative options, such as personal loans or extended mileage loans.
Extended mileage loans are specifically designed for vehicles that exceed the mileage limits of regular used car loans. These loans can be a viable option for cars with over 100,000 miles and up to 10 years old. However, it is worth mentioning that interest rates for used cars are typically higher than those for new vehicles, and borrowers might need to pay more in car loan finance charges for high-mileage used cars.
While some lenders may have mileage restrictions, others offer auto loans with no mileage restrictions. These loans can make it easier to purchase used, high-mileage cars, which are often cheaper than new cars. However, older cars may be more prone to breakdowns and repairs, so regular maintenance is crucial to prevent major issues.
When considering a high-mileage car loan, it is essential to shop around for the best interest rates and ensure you understand the loan terms and monthly payments. Additionally, it is beneficial to compare costs for cars of different ages and mileage to find the most suitable financing deal.
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Frequently asked questions
Yes, some banks do finance cars over 100k miles. However, not all banks offer this, so it is worth shopping around to find the best deal.
Financing a car with over 100k miles may come with higher interest rates than a newer car. Lenders see older cars as a riskier investment as they have already depreciated in value and may need repairs.
A car with over 100k miles is likely to be much cheaper than a newer car. Older cars are also more readily available than newer models.
It is worth considering a loan from a credit union, as these typically have lower interest rates and more flexible terms than banks. Alternatively, you could take out a personal loan, but these tend to have higher interest rates.
