When applying for car finance at a dealership, one of the key factors that can influence your approval is the make and model of the car you're interested in. Lenders and dealerships often consider the car's value, age, and resale potential when determining loan terms and your eligibility for financing. Some cars are easier to finance due to their lower risk, while others may present more challenges. Understanding how the make and model affect your car finance application can help you make an informed choice and improve your chances of approval.
🏦 How Car Make and Model Impact Loan Approval
The make and model of the car you're purchasing can play a crucial role in determining your eligibility for car finance. Lenders assess the car for factors like resale value, market demand, and risk. Here’s how different makes and models can affect your car loan application:
| 🔑 Factor | What It Means | How It Affects Your Loan |
|---|---|---|
| 🚗 Car Value | The car’s value impacts the loan amount and terms. Higher-value cars may offer larger loan amounts. | Lenders may offer higher loan amounts for cars with higher resale value, reducing their risk. |
| 🛠️ Car Age | Newer cars are often seen as less risky since they have a longer lifespan and a higher resale value. | Older cars may come with higher interest rates, shorter loan terms, and more restrictive financing. |
| 💎 Brand Reputation | Well-known brands (e.g., Toyota, Honda, BMW) are easier to finance due to their popularity and reliability. | Cars from reputable brands typically have better financing terms and higher approval rates. |
| 🔧 Car Condition | The condition of the car impacts its value and resale potential. | A car in good condition is easier to finance, while a car with damage may require a larger down payment or result in higher interest rates. |
💡 Why Do Dealerships and Lenders Care About the Car’s Make and Model?
Lenders and dealerships look at several factors when determining whether to approve car finance. The make and model of the car help lenders assess the loan-to-value ratio (LTV), the car’s resale value, and its overall marketability. Here are the main reasons why:
1. Resale Value
🔁 Lenders want to make sure that if you default on your loan, they can recover the amount you owe by reselling the car. Vehicles that retain a higher resale value, like popular models from brands such as Toyota, Ford, or Honda, are considered less risky for lenders because they are easier to sell in the event of repossession.
💡 Tip: Choosing a well-known, popular brand increases your chances of approval due to its strong resale value.
2. Loan-to-Value Ratio (LTV)
📊 The LTV ratio is the amount you borrow compared to the car’s value. Lenders typically prefer cars that are newer and have a higher value, as they are less likely to depreciate quickly. If you choose a high-end car with a high resale value, the lender will likely be more willing to approve a larger loan.
💡 Tip: Be mindful of the LTV ratio—too high of a loan compared to the car’s value may lead to higher interest rates or reduced approval odds.
3. Market Demand and Popularity
🚗 Lenders also consider market demand when financing a car. Cars that are popular and in high demand are easier to finance because they hold their value and are likely to be resold quickly. In contrast, cars with low demand or niche models may be harder to finance.
💡 Tip: Opting for cars with strong market demand can help secure a better loan, as lenders prefer vehicles with stable pricing and strong resale potential.
4. Car Condition
🛠️ The condition of the car affects its value and the risk for the lender. If the car is in poor condition, it may be harder to sell if repossession occurs. Lenders may require a larger down payment or offer higher interest rates on cars that are in less-than-ideal condition.
💡 Tip: Make sure the car is in good condition to improve your approval odds. A car with significant wear and tear may not be eligible for financing unless it is priced accordingly.
💡 Which Cars Are Easier to Finance?
Some cars are much easier to finance than others due to their brand reputation, value, and condition. Here are a few examples of cars that are typically easier to finance:
- Popular Brands: Brands like Toyota, Honda, Ford, and Chevrolet tend to offer reliable models with high resale value. These brands are often approved for financing with competitive rates.
- Newer Vehicles: Newer cars (generally less than 5 years old) are easier to finance due to their lower depreciation and higher resale value.
- Fuel-Efficient Cars: Cars that are fuel-efficient, like Hybrids or electric vehicles (EVs), are becoming more popular, and lenders often offer competitive financing for them.
- Luxury Brands: While luxury vehicles can be expensive, models from brands like BMW, Mercedes-Benz, and Audi often retain their value well, making them easier to finance, especially when they are well-maintained.
💡 Tip: Stick with well-known brands or reliable models to ensure the best financing options.
💡 What Can You Do If the Car You Want Isn’t Easy to Finance?
If the car you want is not easy to finance, there are several ways to improve your chances of approval:
1. Consider a Larger Down Payment
💰 A larger down payment can help offset the risks associated with financing a car that may not be as easy to sell. By reducing the loan amount, you can make the loan less risky for the lender, which can improve your chances of approval.
💡 Tip: Aim for at least a 20% down payment to make your application more appealing to lenders.
2. Look for a Co-Signer
🧑💼 If your car’s make and model is causing issues with your loan approval, consider finding a co-signer with better credit or financial stability. A co-signer reduces the lender’s risk, making it easier to secure financing.
💡 Tip: A co-signer with a strong credit history can help you qualify for better terms and a more affordable loan.
3. Choose a More Affordable Car
🚗 If your dream car is difficult to finance, consider opting for a more affordable model or one with a lower loan amount. Lenders are more likely to approve financing for cars with lower value, as they are less risky and easier to resell.
💡 Tip: A used car in good condition can be a good alternative if you’re having trouble financing a new or high-end vehicle.
🧑💼 Why Use a Finance Broker?
A finance broker can help you navigate the complexities of car finance and secure the best loan for your situation. Brokers work with multiple lenders and can assist you in finding the right car financing options based on the car’s make, model, and your financial profile. They can help you secure financing even if the car you want isn’t the easiest to finance, by working with lenders who are more flexible.
💡 Tip: A broker can also help you negotiate terms and compare rates, ensuring that you get the best deal available.
🔑 Final Thoughts
The make and model of the car you’re purchasing can significantly affect your chances of securing car finance. Popular, well-maintained cars with strong resale value are easier to finance, while niche, high-value, or older cars may be more difficult to get approved for. By considering factors like market demand, condition, and down payment, you can improve your chances of securing car finance.
If you’re unsure about how to navigate the car finance process, working with a finance broker can help you find the best financing options, regardless of the car’s make or model.
DISCLAIMER
The information provided on this website is general in nature only and has been prepared without considering your financial needs, circumstances and objectives and should NOT be construed as financial, taxation or legal advice. For more information, get in touch with our experienced partner brokers today.
