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As of September 2025, conditions have improved a bit for buying a used car. Prices have softened at the end of summer, but supply may not be keeping up with demand.

The average price of a used car was $25,512 in early fall of 2025. Some of those cars will need to be financed, and higher interest rates present their own challenge.

Another thing to watch out for is a drop in the quality of trade-ins. Some of these problems are not obvious. It’s never been more important to get the best possible vehicle for your money. Here’s what to look for when buying a used car.

When Buying a Used Car, the Questions Matter

This is not the time for shyness. Bring a friend with you to make sure you stick with your questions. These 12 will help you make a decision.

1. Why Are They Selling the Car?

Listen carefully to the answer and let the prospective seller talk as long as possible. Within the explanation could be important clues as to why they’re offloading this vehicle besides a desire for a new set of wheels.

2. What Is the Value of The Car By the Book?

Don’t rely on the car owner for this answer. You need independent information to help with negotiating. Go to websites like Kelley Blue Book to get a range of value for the car. This is also a prime opportunity to ask how they arrived at the asking price.

3. What Is the Mileage?

Everyone knows that years cause automobile wear and tear. Americans drive an average of 13,596 miles a year, according to the Federal Highway Administration. Do the multiplication. Does the number they give you make sense considering how old the car is?

Recommended: Financing a Used Car With Over 100K Miles

4. How Many Owners Has the Car Had?

Is the car’s current owner the first one? If not, does the seller know how many people have owned it previously? How long has the seller owned the vehicle? If someone is trying to sell a car after owning it for a year or even less time, there might be some big problems.

Recommended: Do You Need Proof of Insurance to Refinance?

5. Do They Have the Title in Hand?

A longtime owner might not be sure of the location of the title. The problem is, a seller might not have the title because there’s an outstanding loan from the bank. A clear title is free of any doubts about the ownership of the vehicle. If the seller has it, you can be certain that someone won’t appear to try to take back the vehicle after you’ve paid for it.

6. Do They Have Service/Maintenance Records?

If the seller doesn’t have records of maintenance for the car, all is not lost. You might be able to obtain the records from an authorized dealer for the vehicle’s make. The bottom line: Cars need regular tune-ups and oil changes. If a vehicle hasn’t been maintained regularly, it could mean you will end up with costly repairs.

Recommended: Refinancing a Car Loan

7. Has the Car Been in Any Accidents?

A dented bumper isn’t a tragedy. But if the car has been in a big accident and needed bodywork or even a new engine, you really need to know that. The repairs might have left lingering problems.

8. Is the Vehicle Under Warranty?

A private seller may possibly not know this. But a dealership will certainly have access to warranty status. If a car is still covered, it could save you money. If you’re working with a dealer, you may be able to buy an extended warranty.

9. Has the Car Ever Been in a Flood?

If the car has been exposed to flooding, it could cause problems with the electrical system. Look out for mold and rust, too. To find out if there is rest, you may need to look at the car’s underbody with a flashlight.

Recommended: What Is a Salvage Title?

10. How Would the Purchase Affect Your Car Insurance Premiums?

Your insurance premiums may go up with this purchase. Insurers look at the age of the car as well as make and model. Get in touch with an independent insurance agent before you close the deal to hear the numbers.

Recommended: Auto Insurance Resources: A Comprehensive Guide to Car Insurance

11. Can You Take the Car for a Test Drive?

Being able to sit in the car and drive it is crucial. A test drive is the only way to find out how the car handles. Plus it will reveal any issues the seller may not be aware of (or is hiding). If a seller refuses to allow a test drive, that’s a bad sign.

12. Can You Take the Car to a Mechanic for an Independent Inspection?

You should only ask this if you’re serious about buying a used car. But if you are, then you should ask – and if you get any pushback, that, too, is a bad sign.

Recommended: What Happens to a Car Loan When Someone Dies

The Takeaway

With used car prices possibly dropping, it could be time for you to start shopping for a new vehicle, but you need to arm yourself with smart and perceptive questions that drill down on the car’s quality and condition. And it’s essential you listen closely to the answers and proceed with prudence in making your decision.

Sometimes you need a car loan to afford a vehicle, used or new. Refinancing your auto loan has pros and cons to explore.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

How much mileage is too much for a used car?

Typically 100,000 miles is considered a cut-off point for used cars, though some say 200,000 is another limit to consider. Older vehicles often require more frequent maintenance when mileage exceeds 100,000 and things can start to go wrong.

Is it ever a good idea to buy a used car?

Yes, you may get a price break on a sound vehicle without many miles on it. However, If you’re looking at buying a newer used car — models no older than three years in age — you may find that prices are still pretty close to what they sold for when new.

When will used car prices drop?

As of the third quarter of 2025, used car prices were showing signs of a slight, gradual decline but a significant drop is considered to be unlikely in the near future.

Photo credit: iStock/coffeekai

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-083

Using a car for business purposes can come with significant expenses, but the good news is that many of these costs are tax-deductible. Whether you’re a freelancer, small business owner, or part of a larger company, understanding what you can deduct can help you save money and optimize your financial planning.

Keep reading to learn key car-related expenses that qualify for deductions, the methods for calculating them, and the importance of maintaining accurate records to ensure compliance with IRS regulations.

Why Might You Use a Personal Car for Business?

If you are using your personal car for business purposes such as buying supplies, visiting clients, job site visits, business errands, or attending trade shows, your personal car meets the definition of a business vehicle. (On the other hand, if you need a specialized vehicle like a tow truck or a semi for your work, your personal car most likely won’t do the job.)

Using your personal car for business can save you the cost of having to buy another vehicle. You don’t have to worry about where to keep it, since it already “lives” at your house. And on top of all that, there are some tax benefits.

Can You Deduct Car Expenses When Using a Car for Business?

If you’re using a car for business purposes, some of the expenses you incur are tax deductible. The trick is knowing which expenses are considered qualified expenses for your business.

Because you can only deduct expenses related to the operation of the vehicle for business use and not personal, it can get a little tricky. That’s why there are two ways you can deduct expenses.

The first is by using the standard mileage rate set by the IRS. Keep track of the miles you drive for your business and multiply that times this year’s rate to get your tax deduction.

The other option is to keep track of all expenses you incur with the car and then use the number of miles driven for business versus total miles driven for the year to get the deductible portion.

Deductible Expenses

So what are the tax deductions you can write off if you’re using your own car for business use?

Things like car maintenance and repairs, oil changes, gas, tires, licenses, registration, and depreciation are all deductible expenses. You can also deduct parking fees and tolls, even if you use the standard mileage rate.

Nondeductible Expenses

The expenses incurred while using the vehicle for personal errands or trips aren’t deductible. So if you take a road trip for fun, you can’t write off the gas for the trip.

Also, you can’t deduct your miles from home to work, as that’s considered a personal expense.

To summarize, you can only write off expenses for the time you’re using the car for business.

Recommended: How Do You Categorize Expenses for a Small Business?

Other Considerations

If you’re using your car for business, there are a few other things to consider.

Depreciation

Over time, cars depreciate in value. You might have bought a car for $20,000 a decade ago, but only be able to sell it for $5,000 today. The IRS allows you to depreciate a car used for business. However, note that you must be using your car for business at least 50% of the time to qualify for depreciation.

The two methods for calculating depreciation are the straight line method and the declining balance method. Talk to your accountant to determine which is a better option for your tax situation.

Recordkeeping

The IRS can get pretty strict about checking financial records if any discrepancies or red flags pop up. The best thing you can do to prevent an audit (or make one go smoothly) is to keep accurate records.

Make sure to record all miles you travel for business. There are apps that will track this on your phone. You’ll need to note the starting mileage at the beginning of a new year in case you need to compare business miles to total miles driven.

Also, keep receipts from car maintenance visits, tire purchases, gas, and registration, and enter them into your accounting system under the appropriate category.

Employees Driving Company Cars

Another consideration is if your employees use their own cars for company activities, such as driving from one client to another or running errands for the company. Keep in mind you may be liable for them and their cars during business hours, depending on laws in your state.

Employees may be able to claim deductions for the miles they drive their own cars for business, and many employers reimburse employees for those costs, often on a per-mile basis.

Just like when you use your personal car for business expenses, employees can only claim deductions for the portion of the miles driven that are for business, so they’ll need to record those miles.

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Qualifying for the Standard Mileage Deduction

If you’d rather use the standard mileage deduction (it may be simpler than keeping track of all your business-related vehicle expenses), you must meet certain criteria, according to the IRS.

You can’t operate five or more cars at the same time (like if you have a fleet of delivery vans). You can’t have claimed a depreciation deduction for the car using any method other than straight-line, and you can’t have claimed the special depreciation allowance on the car.

To employ the standard mileage rate deduction, you must use it in the first year you have the vehicle for your business. After that, you can use the standard mileage rate or actual expenses for deduction.

Recommended: 9 Tips for Buying a Used Car

Current Standard Mileage Deduction Rate

If you use your car for business, charity, medical or moving purposes, you may be able to take a deduction based on the mileage used for that purpose, according to the IRS.

The standard mileage rates for 2025 are:

•  Self-employed and business: 70 cents/mile

•  Charities: 14 cents/mile

•  Medical: 21 cents/mile

•  Moving (military only): 21 cents/mile

Standard Mileage Deduction vs Actual Expenses

The IRS offers two ways of calculating the cost of using your vehicle in your business: the actual expenses or the standard mileage rate method. You can’t do both.

If you want to go the actual expenses route, track what you spend on your car, including lease payments, depreciation, repairs, oil, gas, new tires, and maintenance. For example, if 40% of your driving is for business, multiply your expenses by 40% to get your write-off.

According to the IRS, “You can generally figure the amount of your deductible car expense by using one of two methods: the standard mileage rate method or the actual expense method. If you qualify to use both methods, you may want to figure your deduction both ways before choosing a method to see which one gives you a larger deduction.”

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Where Do You Deduct Business Vehicle Expenses?

Now that you’re on top of recording business-related vehicle expenses, where do you actually get your deduction for using a car for business purposes? If you work with an accountant, she’ll handle it. You’ll just need to provide your receipts for vehicle expenses if you’re claiming actual expenses, as well as your total and business-related mileage.

If you file your own taxes, you’ll record this information on your Schedule C (Form 1040). Line 9 allows you to input expenses for cars and trucks. Section IV of the form will ask you questions about your business use of the car, including:

•  When you first used the vehicle for business purposes

•  How many of the total miles were business-related

•  Whether the vehicle was available for personal use during off-duty hours

•  Whether you or your spouse have another vehicle available for personal use

•  Whether you have evidence to support your deduction

What Expenses Can You Deduct if You Borrow a Vehicle for Your Business?

Driving any car for business — including a borrowed car — entitles you to deduct expenses like maintenance and gas, though you cannot deduct depreciation because you don’t own the vehicle.

Can You Deduct the Purchase of a Vehicle for Your Business?

It sounds appealing to write off the cost of the car on your taxes. But there are some strict rules about this, and whether you’re buying a vehicle for a small business or a large one, you need to learn the ins and outs.

Section 179 Deductions

The IRS Tax Code Section 179 permits businesses to write off qualifying vehicles as business tax deductions.

The total section 179 deduction and depreciation you can deduct for a passenger automobile, including a truck or van, you use in your business in 2025 is $31,300 if the special depreciation allowance applies, or 40% of that if the special depreciation allowance does not apply.

Section 179 Requirements

Any business that purchases, finances, or leases business equipment in 2025 (spending less than $3,130,000) should qualify for the 179 deduction. Qualifying purchases include tangible goods, off-the-shelf software, and business vehicles.

To qualify for the deduction, you must purchase and place your new vehicle into service between January 1, 2025 and December 31, 2025.

Pros and Cons of a Business Buying a Vehicle

If you’re considering using a personal car for business, it’s important to consider the benefits and drawbacks.

Pros of Using Your Own Car for Business

Having one car for two purposes saves money. If you use a car for work and then after work for personal errands, and don’t need more than that, why pay for two separate vehicles?

Also, using your own car for business purposes gives you tax deductions you can take advantage of. They’re a huge perk of using a car for business and pleasure, and can reduce what you pay in taxes.

Another benefit is that your company can cover some of the costs of maintaining and repairing your vehicle. This means less out-of-pocket expense for you personally.

Cons for Using Your Own Car for Business

On the other hand, using any vehicle is an added expense for your business. If funds are tight, this may not be an expense you can afford, especially if you’re helping to cover large repair costs or registration fees.

You’ll also have the headache of tracking miles for business. It’s easy to forget to turn on your tracking app or check the odometer, and then you’ll miss out on those mileage deduction opportunities.

Recommended: How to Get a Lower Car Payment

Ways to Fund the Purchase of a Personal Car for Business

If you’re considering buying a car that you’ll use for business and wonder if you should purchase it through your company, the first question to ask yourself is: Will the vehicle be used only for business? If you plan to use it for personal activities as well, it’s better to buy it yourself than through your business.

Even if you buy the car yourself, you can still deduct those business-related expenses or claim your standard mileage rate.

If you don’t have the cash to pay for a car in your personal checking account, you may qualify for a car loan.

A Word on Refinancing a Car Loan

If you’re looking to save money on your car loan, you may want to consider an auto loan refinance. A refinance could help you lower your interest rate or reduce your monthly payment.

Interest rates rise and fall, so you may be paying far more than you need to on an old loan. If you’ve built your credit since you first took out the loan, you may also qualify for a lower rate. Use an auto loan refinance calculator to find out where you stand.

Before moving forward with car loan refinancing, consider the total cost to refinance a car. You may have to pay an early termination or transaction fee with the old lender, as well as registration or title transfer fees when the loan is approved. If the fees are less than what you’ll save, by all means, consider refinancing.

Recommended: Pros and Cons of Car Refinancing

The Takeaway

Using your car for business can lead to substantial tax savings if you understand and properly utilize the available deductions. Whether you opt for the standard mileage rate or the actual expense method, keeping detailed and organized records is essential to maximize your deductions and stay compliant with IRS regulations.

If you’re looking for other ways to save money on your vehicle, consider refinancing your auto loan. An auto loan refinance could potentially lower your interest rate or your monthly payment. Just keep in mind that if you extend your loan term, you’ll pay more in interest over the life of the loan.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

How can I buy a car for business use?

You can buy a car through your company if you plan to only use it for business purposes. However, if you want to also use it for personal activities, you must buy the car on your own. You can still deduct business expenses for the miles you drive for qualified business activities.

Where do you deduct business vehicle expenses?

Keep track of your car expenses and how many miles you drive in total and for business, and when you file your taxes, you’ll enter the information on your Schedule C or Form 1040. Line 9 allows you to enter car and truck expenses, and section IV asks questions about your business and personal use of the vehicle.

What expenses can you deduct if you borrow a vehicle for your business?

Whether you borrow, lease, or own a vehicle that you use for business, you can deduct expenses related to maintenance, repair, gas, tires, registration, fees, toll road fees, and parking fees.

What is the current standard mileage deduction rate?

For 2025, the standard mileage rate for self-employed and business is 70 cents a mile.

Photo credit: iStock/PeopleImages

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOALR-Q325-082

If you’re a classic car enthusiast, you likely appreciate the design and historical significance of an antique set of wheels. They not only look cool, but they can be a collector’s item that conjures memories of another era.

Classic cars can also be expensive. And unlike buying a new car, they are potentially a good investment since they can actually appreciate in value. Learn more on financing classic cars, including how much classic cars cost, and what types of loans are available for classic cars.

What Is a Classic Car?

There’s more than one definition of a classic car. The Classic Car Club of America defines a full classic as “a ‘fine’ or ‘distinctive’ automobile and American or foreign built, produced only between 1915 and 1948.” ​​As far as definitions go, that one’s pretty narrow. Other definitions peg a classic car as any vehicle manufactured in 2000 or earlier, and they make distinctions between antique cars built in 1975 or earlier and vintage cars manufactured between 1919 and 1930.

Classic cars typically have been repaired and maintained in accordance with the manufacturer’s original design specifications and should not have been altered.

How Much Does a Classic Car Cost?

The price of a classic car will depend on the car’s make and model, what kind of condition it’s in, and how rare it is. Some might cost a few thousand dollars, especially if they aren’t in top condition, while particularly sought after and rare models can easily fetch millions of dollars.

It’s hard to say for sure which was the most expensive car ever sold, since transactions are often made privately. For example, an American businessman is thought to have bought a Ferrari 250 GTO for $50-plus million. Classic car auctions provide the best verifiable public record of classic car prices.

Recommended: How Much Does a Car A/C Compressor Cost?

How Can I Get a Classic Car Loan?

Most lenders don’t specialize in the collectors car market. For example, they may have little expertise in how to value a classic car. As a result, traditional forms of automobile financing may not apply to a classic vehicle. You may need to look into classic car loans, which are now offered by various specialty lenders. Research these lenders online, or ask other people in the collector car community if they financed their purchases and find out who they used.

Once you’ve identified a lender, you’ll need to go through their loan application process.

Classic Car Financing Credit Score

As with traditional auto loans, the loan amount and interest rate offered through a classic car loan will vary depending on your financial situation. Lenders will review your credit score to help them get an idea of your creditworthiness and how likely you are to pay back your loan on time.

The higher your score, the better the terms and interest rates you’ll likely be offered. If you have a low score, lenders will worry you are at greater risk of defaulting on your loan. To offset some of this risk, your lender will likely offer you a loan with a higher interest rate. Generally speaking, classic car financing with bad credit is a challenge.

Credit score requirements will vary by lender, but favorable classic car financing rates may require a credit score of 660 or higher.

Recommended: Guide to Car Depreciation

Classic Car Financing Rates and Terms

Though terms and interest rates on classic car loans will vary depending on your financial situation. Only people with the best credit scores will qualify for the lowest rates in financing a classic car.

It may be useful to compare classic car interest rates to the average interest rate for a used car, which was 11.87% in early 2025.

Recommended: Car Axle Repair & Replacement Costs

Classic Car Financing Options and Alternatives

A classic car loan is not your only way to get yourself behind the wheel of a vintage automobile. Here’s a look at a few of your other options.

Paying Cash

Buying a classic car outright in cash is the cheapest way to own a classic car. Of course, that requires that you have the cash on hand and don’t need to dip into your emergency savings or retirement fund. Buying in cash means you’ll avoid fees and closing costs on a loan, and you won’t pay any interest, which could ultimately save you thousands of dollars.

Personal Loan

You may also be able to take out a personal loan for a classic car. When you take out a personal loan, you receive a lump sum from your lender anywhere from a few thousand dollars upwards of $100,000, which you’ll pay back in monthly installments with interest. Once you receive the loan, you can use the funds to purchase your classic car.

Loan amount, terms, and interest rates will again depend on your credit history and financial situation. Those with better credit scores will be offered the lowest interest rates. Carefully compare rates between classic car loans and personal loans.

Leasing a Classic Car

If you’re not ready to commit to purchasing a classic car, consider leasing one, whether with a short-term car lease or a long-term one. In return for some upfront costs and a series of monthly payments, leasing allows you to get behind the wheel of a classic car for a relatively short period of time.

You may be subject to mileage restrictions when you lease, as mileage is one of the factors that affects the value of the car. At the end of the lease period, you’ll return the car. And if you so choose, you can swap it out and give a different vehicle a try.

Refinance Your Classic Car

If at any point your classic car loan becomes unmanageable or you’re looking to save money, you may consider refinancing your car loan. When you refinance, you pay off your old loan with a new one, hopefully with better terms or a better interest rate.

When is the best time to refinance a car? You may consider refinancing when interest rates drop or when your financial situation improves. For example, if you’ve built your credit score, you may qualify for a new loan with a lower interest rate.

What are the benefits of an auto loan refinance? A lower interest rate can save you money over the life of the loan, while a longer term may lower your monthly payments. Because you’re paying interest for longer, however, a longer term may be more costly in the long run.

Beware that there are costs of refinancing an auto loan. Be sure you understand any extra upfront fees or closing costs that might reduce the amount you save by securing a lower interest rate.

Recommended: Questions to Ask When Refinancing

The Takeaway

Classic cars can be a joy to own, thanks to their time-honored design and collectibility. Classic car loans are one of the best ways to finance the purchase of a vintage automobile. However, you may also want to compare terms and interest rates to a personal loan to see if it is less expensive. Once you lock in a loan, you aren’t necessarily stuck with it forever. Down the road, you can look into refinancing to see if you could save money.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Is it smart to finance a classic car?

Financing a classic car might be an option if you don’t have the cash on hand to purchase it, or if that cash is better put to use in other ways. For example, if you are able to invest it at a higher rate of return than the interest rate on your loan, it may be smart to finance your vehicle. That said, be careful to only finance a classic car if you can truly afford to do so and can make monthly payments on time.

What are classic car financing terms?

They vary widely. A classic car loan is almost always different from a standard auto loan. With many of them, a sizable cash down payment will help you get favorable interest and terms.

What classic car financing options are there?

You can finance a classic car with a classic car loan, or you may want to consider a personal loan, which offers a borrower a lump sum of cash with no limitations on how that money is spent.

Photo credit: iStock/svetikd

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-081

If you believe that your vehicle’s catalytic converter is no longer functioning well, you’ll likely be wondering just what the catalytic converter replacement cost might be. Here you can learn the symptoms of a bad catalytic converter, whether you can keep driving while deciding how to fix the issue, and ways to pay for repair or replacement costs.

What Is a Catalytic Converter?

The catalytic converter is an important part of a vehicle’s emission system. It converts hydrocarbons, nitrogen oxides, and carbon monoxide into carbon dioxide and water. This process helps to protect the environment by reducing the amount of harmful substances in the atmosphere.

In appearance, a catalytic converter resembles a muffler. It’s located near the car’s engine by the muffler.

What Does a Catalytic Converter Do?

As mentioned above, a catalytic converter is a critical part of a vehicle’s emission control system. The converter typically sits in the exhaust system and helps control the engine’s combustion.

If your car runs on gasoline, a properly functioning catalytic converter can minimize the amount of carbon monoxide, nitrogen oxides, and hydrocarbons that come out of the tailpipe.

How Much Does a Catalytic Converter Cost?

Prices can vary significantly. Options include universal ones (they aren’t created for a specific vehicle) and direct-fit ones, which are specifically designed for a vehicle’s year, make, and model.

As one benchmark, a muffler shop may charge $200 to $300 to weld in a new universal model. For many newer vehicles, though, only direct-fit catalytic converters will work — with pricing currently ranging anywhere from $300 to $2,500, according to AutoZone.

Why Catalytic Converters Cost So Much

The raw materials used in the manufacturing of catalytic converters can include platinum and other precious metals. The underlying raw materials are typically costly, so that explains why a catalytic converter can cost hundreds of dollars in parts alone.

Labor Cost of Replacing a Catalytic Converter

The labor cost of replacing a catalytic converter can vary from $70 to $130 per hour, depending on your mechanic. Replacing catalytic converters may not cost as much as replacing shocks and struts, but the labor charge can add up. Ask the shop if the price they are quoting includes parts and labor.

Recommended: Alternator Repair Costs

Symptoms of a Bad Catalytic Converter

Signs include:

•  Loss of engine power

•  Unusual smell

•  Engine light

•  Car misfire

•  Rattling and stalling

•  Emissions test

Loss of Engine Power

With a bad catalytic converter, gasses will build up in your vehicle instead of being appropriately released, which puts pressure on your car’s engine. You may notice that your vehicle isn’t starting well. Plus, it can be hard to accelerate.

Unusual Smell

This car part converts sulfate in your vehicle’s fuel to a less harmful substance but, when a catalytic converter isn’t working properly, it doesn’t manage the sulfate well. This substance remains in the fuel and produces a smell of rotten eggs.

Engine Light

When your check engine light goes on, this can indicate a variety of issues — and one of them is a problem with your catalytic converter. So, when this light turns on, don’t ignore it. Find out the cause.

Car Misfire

With a faulty catalytic converter, your vehicle’s engine can misfire. When the engine is misfiring, this can further shorten the lifespan of a catalytic converter and trigger a meltdown.

Rattling and Stalling

The loss of engine power described above could make your vehicle stall out — and, although a bad catalytic converter won’t directly cause rattling, it can damage another part: a honeycomb mesh. When this mesh is damaged, the vehicle may very well rattle.

Emissions Tests

If your state requires emissions testing, your vehicle may fail the test because the catalytic converter isn’t effectively doing its job. So, to pass the test to continue to drive legally, you need to maintain this car part.

Recommended: Luxury Cars by Maintenance Ranked

Why Might You Replace or Repair a Catalytic Converter?

You might consider replacing a catalytic converter for the following reasons:

Environmental Protection

When your car has a poorly performing catalytic converter, it propels toxic components into the environment. Carbon monoxide, nitrogen oxides, and hydrocarbons are among the tailpipe emissions that can pollute the air. You may decide to repair or replace your catalytic converter as an eco-friendly action.

Better Car Performance

As mentioned above, a bad catalytic converter can cause your engine to misfire. If your car is experiencing performance issues caused by a degrading catalytic converter, repairing or replacing yours can make driving more efficient and enjoyable again.

Recommended: What Is the Average Credit Score to Buy a Car?

Can You Prevent Catalytic Converter Theft?

As mentioned earlier, catalytic converters are made from raw materials that can include platinum. That can make them a prime target for thieves who might sell the part as scrap metal.

Fortunately you can take the following steps to help prevent catalytic converter theft:

1.   Install a catalytic converter security shield

2.   Install a motion-detection alarm system in the area of your property where you usually park

3.   Park in safe areas

Recommended: Car Radiator Repair and Replacement Costs

Can You Drive a Car With a Catalytic Converter Problem?

Early on, you may be able to drive with plugged parts. As you continue to notice some driving problems, though, the damage to the catalytic converter may well be getting worse and affecting your car’s engine.

What Happens if You Don’t Replace Your Catalytic Converter?

Eventually, this can lead to serious enough engine problems that you won’t be able to drive your car. As the flow of exhaust lessens, the engine can’t get the necessary amount of air and, eventually, it can shut down altogether.

How Often Do Catalytic Converters Need to Be Replaced?

If you’re experiencing any of the symptoms of a bad converter and your car is 10 or older, you may want to proactively have your catalytic converter checked out by an experienced mechanic. On average, this part lasts 10 years.

4 Ways To Pay for a Catalytic Converter Replacement

Here are four ways you can pay for a catalytic converter replacement:

1. Cash

If paying for a catalytic converter replacement with cash is no strain on your budget, then that can be a straightforward way of taking care of the expenses without having to pay any interest charges.

2. Credit Card

It isn’t always practical to pay for your catalytic converter repair cost or replacement cost from cash in your savings or checking account. When that’s the situation, credit cards can be a convenient solution. You can pay over time and perhaps earn rewards. If the balance isn’t paid in full, though, interest charges may accrue. Some credit cards have an introductory 0% annual percentage rate, but average APRs can otherwise exceed 20%.

3. Personal Loan

You can typically get a lower interest rate on a personal loan than on a credit card (although monthly payments may be higher). You’d make regular installment payments until the balance is paid off and, if the debt is an unsecured personal loan, you wouldn’t need to put up any collateral.

4. Cash-out Auto Refinance

Another method if you have equity in your car (the difference between its value and what you owe on your loan) is to do a cash-out auto refinance. This allows you to refinance for a higher amount than your current loan. You pay off the existing loan and can then dedicate some or all of the funds you have left toward the repair required.

Typical Cost of Other Common Car Repairs

There are cheap car repairs and expensive car repairs, depending on your maintenance issue. Common car repairs include:

•  Engine replacements

•  Airbag replacements

•  Transmission replacements

Here’s more about each:

Engine Replacement Cost

The cost of engine replacement will vary, based on your vehicle and whether you’re actually replacing the engine or having it rebuilt. A new engine may well cost $2,000 to $10,000. If your engine is worth rebuilding, you can save some money. This may cost $2,500 to $4,000 but, because this may take a couple of weeks to complete, you could have rental car fees to pay, too.

Airbag Replacement Cost

This protective cushion can inflate during a collision to protect you and your passengers during a crash. If yours is deployed, the cost of airbag replacement may be $1,500 each, though luxury and imported cars can cost significantly more. If multiple ones act to protect you during an accident, costs can go up. In some cases, you can have an airbag reconfigured to save money. Other times, you may be able to find a used steering wheel with a still-functional airbag, which can also translate into savings.

Transmission Replacement Cost

Although your vehicle’s engine creates power, the transmission regulates how much reaches your wheels at a particular time. The cost of transmission replacement can be $2,900 to $7,100 currently, according to Kelley Blue Book.

The Takeaway

So, how much does it cost to replace a catalytic converter? There are a range of possibilities, including when a universal model is usable and when a direct-fit one is desired or required. If you’re wondering how to minimize the cost, there are times when mechanics may be able to weld together a solution at a more affordable price.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

How much does a catalytic converter cost?

Prices can range from a few hundred dollars to a couple of thousand, depending on your vehicle’s year, make, and model. If your car can use a universal model, less expensive options may be available.

What happens if you don’t replace your catalytic converter?

Eventually, the catalytic converter can stop being functional, with significant engine damage. So, although you may be able to drive with a slightly plugged-up catalytic converter, if the issue isn’t addressed, you may reach a point when your vehicle isn’t driveable.

How do you pay for a catalytic converter replacement?

Ways to finance it include paying cash out of pocket; using a credit card; and taking out a personal loan. If you can cover the costs out of your checking or savings account, this means you won’t have to pay interest on the expense. If that isn’t doable, then it can make sense to weigh the pros and cons of credit cards and personal loans.

Will your car drive with a bad catalytic converter?

Driving with a bad catalytic converter is possible in the early stages, but eventually the problem can lead to serious enough engine problems that you won’t be able to drive your car. As the flow of exhaust lessens, the engine can’t get the necessary amount of air and, eventually, it can shut down altogether.

What is the cheapest way to fix a catalytic converter?

The cheapest way to fix a bad catalytic converter is generally to have an auto mechanic weld in a new universal model. That could cost between $200 to $300, but your catalytic converter replacement cost could be higher if your vehicle requires a direct-fit catalytic converter.

Photo credit: iStock/RealPeopleGroup

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-080

Interest is the amount of money you pay to borrow money. For auto loans, interest can be calculated in different ways. These include simple interest and precomputed interest, which involves calculating the interest due at the start of the loan and adding it to the principal before dividing that into monthly payments.

A precomputed interest car loan is relatively uncommon. Still, it’s wise to know what these loans are and how they work in case you’re ever offered a precomputed loan.

What Is Precomputed Interest?

Precomputed interest is one of the ways lenders calculate car loan interest. With precomputed interest, the lender determines how much interest you would pay over the course of the loan if you only made the minimum payments each month. They take that amount and add it to your loan principal to come up with the balance you owe, and then divide the total into monthly payments.

With precomputed interest, the interest is highest at the beginning of the loan. If you pay off your car loan early, the lender makes more money and your savings may not be as great.

Auto loans are calculated using simple interest. But some lenders, especially those who specialize in working with borrowers with bad credit, may favor precomputed interest.

Recommended: Guide to Car Loan Interest Rates

Precomputed Interest vs Simple Interest

With simple interest car loans, the interest is calculated based on the balance of your loan on the payment due date each month. As your loan balance shrinks, less money goes to interest payments, and more goes to paying off your principal. If you make extra payments to reduce your principal faster, you’ll pay less interest over the life of your car loan.

The basic difference between precomputed interest loans and simple interest is that with precomputed interest, you pay more interest at the beginning of the loan. With simple interest, the interest is based on your loan balance, and what you pay in interest goes down over time.

Recommended: Which Credit Bureau Is Used Most for Car Loans?

Calculating Precomputed Interest

A precomputed loan is calculated on a 12-month loan using what’s known as the Rule of 78.

The rule gets its name from adding together all the months in a year:

1+2+3+4+5+6+7+8+9+10+11+12=78

The lender gives each of the 12 months a portion of the total interest owed, with the biggest share in the first month, and then descending from there. So the first month gets 12/78 of the interest, the second month gets 11/78, and so on, until the last month is assigned 1/78 of the interest.

A precomputed interest car loan with a 24-month term uses a similar formula for precomputed interest. The lender adds up all the numbers from 1 to 24, which equals 300. The first month of the loan gets 24/300 of the interest, and then goes down from there.

This means if you pay off your loan early, the lender makes more money. For the borrower, the savings are considerably less with a precomputed loan than they would be with a simple interest loan.

The Rule of 78 is controversial. Its use is banned in some states, and other states put heavy restrictions on it. By law, lenders are not allowed to use the Rule of 78 on loans longer than 61 months.

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Pros and Cons of Precomputed Interest Car Loan

If you’re making your regular payments over the life of the auto loan, precomputed interest won’t be much different than simple interest. You’ll pay the same amount in interest overall, but it will be applied differently.

And for borrowers with bad credit, a precomputed loan may be easier to qualify for.

However, if there’s any possibility that you’ll pay off your car loan early, you may want to avoid precomputed loans. Even though lenders technically have to refund you interest that hasn’t yet been earned on the loan, with a precomputed loan, you’ve paid more interest early. As a result, you’ll get less interest back when you prepay a precomputed loan than a loan with simple interest.

In addition, by law, precomputed loans can’t be longer than 61 months. That term could make your monthly payments higher than a loan with a longer term.

Refinancing a Precomputed Loan

If you get a precomputed interest car loan, you may want to consider refinancing it. When you refinance a loan, you pay off the old loan and get a new one, ideally one with a good auto loan interest rate or a longer term. When refinancing, you could look for a loan with simple interest rather than a precomputed loan.

If you qualify for an auto refinancing loan with more favorable terms, it could help lower your monthly payment. Generally, the better your credit, the lower the interest rate you’ll get.

If you’re thinking about refinancing, one of the tips for auto loan refinance is to be sure to make all your bill payments on time which could help strengthen your credit so that you might be able to qualify for a lower rate.

The Takeaway

With an auto loan with precomputed interest, you’ll pay more in interest at the beginning of the loan term and potentially lose out on savings if you repay the loan early. A loan with simple interest may be best for many borrowers. However, weigh the pros and cons to determine what makes the most sense for your specific situation.

And remember, you don’t have to keep a precomputed loan if it’s not working for you. In that case, you can explore auto loan refinancing.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Are car loans simple or precomputed interest?

Most car loans are simple interest loans. However, some auto loans do use precomputed interest. This may be especially true with lenders that work with borrowers with poor credit.

Can I pay off a precomputed loan early?

Yes, you can typically pay off a precomputed loan early. However, because you pay more interest at the beginning of a precomputed loan, your savings will not be as big as they would be with a simple interest loan.

What is the difference between simple interest and precomputed interest?

The way simple interest is calculated is based on your loan balance on the day your monthly payment is due. As you pay down the loan, the less interest you owe. Precomputed interest is calculated over the length of the loan and then added to the principal amount. The interest is divided over the term of the loan in such a way that borrowers pay more in interest at the beginning of the loan.

Photo credit: iStock/FG Trade

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-079