With the quality of cars improving and some owners holding onto their cars for over 10 years, dealer lots are filled with a wide variety of high mileage used vehicles. If the family budget is tight and the only option is a decade-old car, is it difficult to line up a loan for a vehicle that is 10 or more years old?

Not so, according to one Chase banker as well as a senior economist for the Credit Union National Association. Some banks, including Chase, and most credit unions will consider loans on used vehicles that are 10 years of age or older. 

“We’d review them on a case-by-case basis.  It is more about the individual than the collateral with a 10-year-old vehicle because it’s an unsecured loan at that point,” said Chase auto executive Bruce Jackson at the bank’s headquarters in New York.

Average car more than 11 years old

The average age for cars and light-duty trucks on the road today is 11.6 years, a record level, according to a 2016 analysis by IHS Markit, a consultancy that studies the global automotive industry. Sources outside of IHS expect the average age to increase, possibly to as high as 12 years this year or next when data is analyzed.

“The quality of new vehicles continues to be a key driver of the rising average vehicle age,” Mark Seng, director of the global automotive aftermarket practice at IHS Markit, said at the time the analysis was released. In addition, there are fewer used vehicles in the marketplace because of the recession, and that “created an acceleration beyond its traditional rate due to the nearly 40 percent drop in new vehicle sales in 2008-2009.”

Today, rising new car prices and what some families perceive to be late model used car prices that are too high for their budget are forcing them into used vehicles they never would have considered a few years ago.

Financing high mileage cars

“There are sources that will finance older cars and there are sources that will finance up to 150,000 miles,” according to a dealer who did not want to be identified. “That is opening up and cars are lasting longer. In the past you get a car with 60,000 miles, it was falling apart. Cars last longer so finance companies are willing to take older cars because cars are better.”

Jordan van Rijn, senior economist at the Credit Union National Association, Madison, Wis., agrees that vehicles are lasting longer, and he adds that credit unions are a good source for this type of loan because of their mission.

“Many credit unions are CDFIs (Community Development Financial Institutions). They have a real mission of serving maybe minorities, low income people who tend to perhaps buy more used and older vehicles because maybe that fits into their budget a little bit better,” said van Rijn.

Credit union connections

Of course, a potential borrower needs to be a member of the credit union where the loan will be administered. The advantage for some borrowers is that the staff “kind of knows the people (borrowers) a little bit better, has a better sense of what their needs are,” he said. The decision makers are more likely to be aware that purchasing a car or truck that’s over 10 years old might be that person’s only option to travel to work, pay the mortgage or rent, and other bills.

A benefit for the borrower is that each credit union is a non-profit organization so the interest rate for the used car loan likely will be lower than a traditional bank.

“They don’t have a model that requires maximizing profits, maximizing shareholder value. They are really out there to maximize service to their members,” van Rijn said.

In conclusion, the bottom line is that if a vehicle is found that is over 10 years old, has the right price, looks attractive and fits your needs, a loan likely will be available from a bank, credit union or other financial institution, assuming that your credit is good.

However, before an agreement is signed to purchase a vehicle it should be inspected by a reputable auto repair shop. Simply, you don’t want to sell your old clunker and end up with another.

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