Why does the loan for older used cars have higher interest rate?
Thread DetailsLast Edited by teetee1 October 6, 2015 at 08:13 AM
I noticed that with the same loan period, some lenders charge higher interest rate for the loan for the older used cars. For example, the 2014 used car loan has interest rate of 1.99%. For used cars made in 2010, the interest rate is increased to 3.09%. Both loans are for 66mo period.
What's the reason for this increase from banker's perspective? If they take the depreciation value of the used car into consideration, the depreciation curve should give the opposite result, meaning that they should charge higher interest rate for newer used car than the older used car.
Or the interest rates difference is the means that they want used car consumers to get newer used cars? But why?