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Easier To Finance Used Car or New Car? [Newbie History]

Established Member

Easier To Finance Used Car or New Car? [Newbie History]



I'm planning in to finance a new car (either CPO or new) and I was wondering if it might be easier to finance CPO or new? I am asking this question because my credit history really is limited as I only have two open trade lines: a secured Discover CC and TD Auto Finance (for my current car). Now I am planning to trade in this car with negative equity and going to put around 5k down to wash some of it down. I know that for newer cars the LTV is easier due to the fact that there are cash discounts and whatnot that bring the price below MSRP. But as far as lender decision goes, are they more strict for new cars or used cars (such as CPO)? Does using captive lender help improve chances of approval? I've heard that its easier if you are trading in for a more expensive car (from a Honda finance manager). 


I am looking towards a new or CPO Lexus and I know that they use the same bank as Toyota. Would they be lenient and open to new account history such as mine or would I have a bad chance? Should I open more trade lines (such as an unsecured CC) from now until then to improve my portfolio? 


My AAoA then will be over 1 year and my scores will be above 720+ (FICO) or so by then. I don't have any lates or baddies or anything. There are inquiries (double digits) from a dealership shot-gunning my app when I applied for my first car and eventually got TD Auto so I don't know if that affects this or not. 


Advice needed please! (I know trading in is a bad idea but in my current situation, its better to bite this bullet than ending up with an unreliable car later on) 

Message 1 of 4
Established Contributor

Re: Easier To Finance Used Car or New Car? [Newbie History]

Used is always easier because it depreciates less.


Burying the negative equity could be harder on a CPO.  Most banks/credit unions won't loan more than 120% of the value of the car.  DCU For example uses the NADA retail value.


If you have too much negative equity you will have to put more money down.


Not sure about Lexus but my CPO Audi has 44 months unlimited mile warranty as opposed to 48 months 50K for new so check out that CPO warranty.


The lower cost of the CPO car may also help get you approved with a thin file.


Multiple auto inquiries within a timeperiod are factored as one so don't worry about those.

Message 2 of 4
Established Member

Re: Easier To Finance Used Car or New Car? [Newbie History]

That's an interesting take because I had always thought and heard (from sales) that financing new would be easier due to the discounts available which bring the LTV below 100%. But I'm not sure if LTV for new cars are based on MSRP or on invoice price. 


But me personally I would love to CPO so that I can avoid the first couple of years of depreciation but I just wanted to get approved for the car I wanted so if that meant buying new then so be it lol. I plan on putting money down to wash away 80% of the negative equity so I hope that going the CPO would be better.


Isn't CPO technically considered 'new' in the eyes of the captive lender? 


Some of those inquiries weren't coded properly so they took a good chunk of score from me. As it stands only my TU is above 700 and the rest are VERY close to 700 where they should've been above by now. 


Does opening a new CC account help my standing or should I not do that because of the inquiry and score drop that I'll suffer from?


Thanks for your input though! 

Message 3 of 4
Community Leader
Mega Contributor

Re: Easier To Finance Used Car or New Car? [Newbie History]

The newer the car, the better chance of financing and for better rates. One of the moderator's here used to work for TFS and might be able to answer your questions in better detail. Don't remember who it was, but search for threads regarding TFS.

Message 4 of 4
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