Finance, Forex and Investments

Why are used car interest rates typically higher than new ones?

I've notice that the interest rates for new vehicles tend to be lower than the interest rates for used vehicles, why?

Public Comments

1. Two reasons: 1) If you finance your new car through the manufacturer's finance company, they often offer low promotional rates to help sell cars. 2) New cars pose less risk to the lender. If the borrower defaults and the car is repossessed, chances are better with a new car that the loan balance can be recovered. Less so with used cars, especially with older cars with higher mileage.
2. New cars have interest incentives through the captive financing company of the manufacturer. This is to entice people to buy new cars which lowers the national daily supply of cars and keeps the production lines moving. This aids the manufacturer in making money. Some manufacturers also have APR incentives on their Certified Used Cars. The interest rate and the extended warranty are two very good reasons to buy a CUC rather than one that isn't certified. These incentives helps the dealer make a profit. Also, new cars and CUC's have a lower risk of substantial loss in case of a repo. They can be sold at a much better price at the auctions than a repo used car. Lower risk = lower APR.