What You Need to Know About Auto Loans for High-Mileage Cars

“They don’t make them like this anymore.” That’s a common saying you’ll hear about older cars versus newer models. Depending on which side of the vehicle argument you’re on, a high-mileage car may be the way to go.

According to Consumer Reports, a high-mileage car can last as long as 200,000 miles. How? High-mileage cars don’t always mean poor quality. Depending on how the prior owner took care of an older car, its condition may even rival that of a car with a four-digit mileage.

But how do you finance a car with thousands of miles on it? And what questions should you ask pre-purchase?

Financing a high-mileage auto loan

As with all cars, credit history, salary, and work history will be what lenders look at when agreeing to finance any car. However, lenders will be just as concerned about the state of the car too. Here are common things they’ll look out for: 

1. If the car is already in bad shape – lenders may find it too risky to approve the loan only for your car to break down a year from now—with an outstanding balance they still fully intend to collect.
2. Lenders will look at your own driving history and insurance claims to make sure you’re not in the habit of walking away from auto accidents or have auto insurance lapses from previous cars (if applicable).
3. Lenders will look at your credit score, credit history, and work history. They want to make sure you can actually afford the monthly car payment, along with the final price. Your debt-to-income ratio will determine whether this is a realistic purchase.
4. Depending on your income, they may ask for personal and professional references if your financial background seems risky. Be prepared to have a cosigner if you already know there will be questions about your salary (ex. self-employed borrowers, new hires, retirees, gig workers).

It’s possible that you may be eligible for an auto loan but not a high-mileage auto loan. Know your credit history before requesting this loan. If it’s the car, ask about other options. If it’s your credit history, ask for the rejection reason.

Knowing which pre-purchase questions to ask for high-mileage auto loans

High-mileage car buyers should be just as picky as lenders are when choosing a high-mileage car and auto loan. If you’re lucky and a careful driver, that “old” car can last long after the loan is paid off. 

Don’t be afraid to ask important questions about this car’s condition, including:

• Has the transmission been replaced or is it currently in need of repairs?
• Do the brakes squeal when making an abrupt stop? Do they stop the car without slamming the pedal into the floor?
• When was the last time the battery was replaced? (On average, car batteries need to be replaced every three to five years. However, for some cars with meticulous maintenance, a car battery can last longer than the warranty.)
• How old are the tires? (The penny test—sticking that heads-up coin into the groove to see if you can see Abraham Lincoln’s face—you will quickly know whether new tires are needed.)
• Is the fuel pump functioning properly? (Although this part tends to last the lifetime of the car, for riskier drivers who constantly drive until the tank is almost empty, this may not be the case.)
• If the car has more than 75,000 miles on it, is high-mileage oil being used in place of other brands for routine oil changes?
• If the car has more than 60,000 miles on it, does the timing belt need to be replaced?
• Is the car leaking oil? 
• Does the car shake at higher speeds?

Imperfect answers don’t mean the car is a complete bust. It just lets you know how much more you’ll need to invest in order to make a high-mileage car worth the asking price. This is the time to renegotiate the final purchase price before signing a car off on a car loan. You don’t want to buy a car and find serious repairs you can’t pay for after you’ve taken out the loan, stay vigilant.

FAQs

What is considered a “high-mileage car”?

High-mileage cars don’t always have odometers in the six-figure range. While many lenders will consider a high-mileage vehicle as one with 100,000-plus miles, some lenders might classify younger cars that are putting on 16,000 or 17,000 miles a year as high-mileage cars.

Which high-mileage cars have a better chance of being financed?

Car models that have a reputation for running longer, such as Toyota Camrys, Chevrolet Silverados, Honda CR-Vs, Toyota Corollas, and Subaru Foresters, will often give you the best chance of getting a high-mileage loan. 

Lenders may be more likely to approve a car that they know has a high likelihood of lasting as long, if not longer, than the length of the loan. Alternatively, you can negotiate a shorter loan term, which means paying less interest and increasing your chances of loan approval.

Would buying a high-mileage car from an auction be cheaper than a dealership?

Auction cars are sold as is and often need repairs (sometimes major) to be roadworthy. With the added competition from dealerships bidding in auctions, due to recent inventory shortages, auction prices are higher than before and buying at an auction may not be as money-saving as it once was.

If you have a working knowledge of cars and bid well, you may find success. But, for the average individual, buying a car from a reputable second-hand dealer will be safer in terms of reducing the likelihood of major repairs and securing an auto loan. Post-COVID-19, independent buyers (and sellers) are competing with auto dealerships trying to fill their lots. Car prices have risen a lot in the last year. The average price paid for a preowned vehicle hit a record of $25,463 in April 2021, about $2,800 higher than April 2020. Car buyers may not find as much of a difference in price between auctioned cars and dealership cars until the demand levels out.

Is hiring an auction broker worth it for buying a high-mileage car at an auction?

While hiring an auction broker eliminates the requirement to be a licensed dealer to buy a car, the used car “deal” may not be worth it when the broker’s fees plus terms and conditions are included.

Does refinancing your current high-mileage car make more sense than getting a new car?

If the goal is to lower your monthly payments, refinancing your newer, high-mileage car may be more economical than gambling with someone else’s vehicle history. Depending on your credit score, refinancing or buying a new or used car can be a challenge no matter what.

How do you know an older car’s actual driving history or repairs?

For cars from the 1960s and 1970s, calculating the actual mileage is complicated. After the vehicle odometers reach 99,999 miles, they roll back to zero. If you’re buying an older car and the mileage looks suspiciously low, make sure to ask the owner if the mileage is a rollover.

For high-mileage cars from 1996 and onward, an ODB2 Sensor can also confirm the mileage even if the odometer display is broken, as long as the onboard computer for your car is working. For cars made between 1978-1995, they rely on OBD1, and you would need an older/retro sensor.

Will you pay a higher insurance premium for an older car?

High-mileage car owners may be pleasantly surprised to find that older cars have cheaper insurance rates. 

However, the title and damage history; coverage preferences; make, model and year of the car will be the final deciders. Educational background and driving history also influence the price of insurance, regardless of the vehicle’s make, model, or mileage.

How do you maintain a high-mileage car without the owner’s manual?

If the make and model are foreign to you, try reviewing the manufacturer’s website for suggested maintenance. To preserve a high-mileage car, go easy on the brakes and accelerator, and make careful turns. If you take the vehicle out on rough roads, try and steer clear of potholes.

The Wrap Up

Is a high-mileage car worth its value in the end? The answer to this one largely depends on the state of the car when you bought it, your driving habits, how much the car cost, and the loan terms. For many, a high-mileage car is worth every penny. For others, a new car is less of a hassle, and the extra money they might pay out of pocket is outweighed by their peace of mind.

Sources:

• Erie Insurance. (2022, June 9). How Many Miles Can a Car Last?
• FIXD Research Team. (2022). Fuel Pump Replacement Cost. FIXD.
• Maxwell, R. (2022, September 29). 7 Best Car Batteries That Will Last The Longest. Family Handyman.
• Naughton, N. (2021, May 10). Looking to Buy a Used Car? Expect High Prices, Few Options. The Wall Street Journal.
• Progressive. (n.d.) New Car Insurance.
• Richards, M. (2019, July 4). Where Can I Find Public Dealer Auctions in the United States? Auto Auction Mall.
• Ross, J. (2022). How Much Does It Cost to Replace a Car Battery? FIXD.
• Schmidt, D. (2022, February 11). Used Cars With 100,000 Miles (And Still Worth Every Dollar). Hot Cars.