How Can I Finance An Older Car Without Paying A Super High-Interest Rate?

Illustration for article titled How Can I Finance An Older Car Without Paying A Super High-Interest Rate?
Image: Porsche

As Jalopnik’s resident car-buying expert and a professional car shopper, I get emails. Lots of emails. I’ve picked a few of your questions and will try to help out. This week we are discussing financing for used cars that are a bit older, and whether or not a lifetime warranty applies to a lease buyout.

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First up, is it possible to buy an older car without a sky-high APR?

“I’ve been listening to some car-related podcasts lately, and they have peaked my interest in the second generation Porsche Boxster/ first generation Porsche Cayman. These usually run somewhere between $22k-$30k for a mild mileage one. But these cars are also almost 20 years old and interest rates are quite high for something of that vintage. Those rates get you pretty damn close to worth almost double that brand new (ie M240i or Supra). Are their better used financing options out there for cars that aren’t really classics, yet aren’t really late models?

Also sort of along the lines of the Porsches above, I’ve toyed with the idea of getting a well cared for used Honda Prelude. Given the rise of used car prices, and demand for anything 90's and Japanese, these are soaring beyond book appraisals. From what I can tell, lending places will not lend you more than the car is worth (makes sense), but I’d rather not put my other two cars as collateral. These fall into the same boat of not really being a classic and not really being a late model. Any suggestions there, as well?”

Most banks do not want to underwrite loans for older models as they see those as higher risk, so they structure their interest rates to discourage buying older cars with loans. However, there are some lenders that specialize in older/vintage cars in addition to some online banks that allow for more flexibility in regards to the model year.

My clients have had a lot of success with PenFed. That bank does not typically have restrictions on model years and offers competitive rates. Hagarty has links to some lenders on its website for folks looking to finance an older car. One of those banks is LightStream and that can be a good option for folks looking to buy any used car, regardless of age. Of course, you will want to have top-tier credit to qualify for the best rates and it always pays to shop your loan among several lenders to compare your rates.

Next up, do those “lifetime extended warranties” apply to leases that are bought out?

“I am thinking about buying my leased truck. It came with a lifetime powertrain warranty. I asked the dealer and he said no because if I buy the truck I will be considered the 2nd owner. So I called Fidelity and she said no as long as I own the truck it stays with me. what do you think ?”

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In this case, it really isn’t about “what I think” but rather what the policy is for the underwriter of the warranty. If Fidelity is telling you that the warranty stays with you and can put that in writing, it would seem you are in the clear. However, this may not be the case in all instances. Often dealers will offer a “lifetime powertrain” warranty as a perk for buying their car, technically speaking if you lease that car the leasing company is the “owner,” so that warranty may not carry over if you choose to buy your lease at the end. It all comes down to the language of the contract.

Got a car buying conundrum that you need some assistance with? Email me at tom.mcparland@jalopnik.com!

Tom is a contributing writer for Jalopnik and runs AutomatchConsulting.com. He saves people money and takes the hassle out of buying or leasing a car. (Facebook.com/AutomatchConsulting)

DISCUSSION

I’m the farthest thing from a “pay cash for everything” guy, but even I run into my limits at “How can I get a loan of over 100% of book value for a 25 year old Honda?”

My guy, you actually can’t afford that car.