What is used car finance?

Few of us have the cash to buy a car – even if it’s a second-hand car! Used car finance is a simple way for you to spread the cost of a vehicle. You can get on the road sooner and pay off the car using predictable monthly repayments.

While the concept of financing is straightforward, various types of deals are available for you to choose from. You’ll be able to find the right used car finance deal for you! Read on to learn more about the general types of used vehicle finance.

How much will used car finance cost?

How long is a piece of string? Ultimately, how much your used car finance deal costs will depend on various factors, including:

The total amount of the car: As you’ll imagine, most of your repayments will be the cost of the vehicle.

The contract term: How much you pay monthly depends on the length of the contract you’ve signed up for. If you have a 48-month deal, you’ll pay less a month than a 36-month deal, but more interest, and thus more overall. Most used car finance deals are two to five-year terms.

Your interest rate: If you have a good credit score, you’ll likely receive offers for a relatively low-interest rate. A low-interest rate means you’ll be paying less overall. However, you will likely face a higher interest rate if you have a poor credit score. If this is the case, you’ll probably want a shorter repayment term, so you’re paying less overall.

Get an idea of your used car finance costs with our car finance calculator.

Used car finance made simple

While used car finance can initially seem a bit confusing, it doesn’t have to be.

We’re here to help. You can find the right used vehicle finance deal for you through Young Car Driver. We’ll take the information and what you need and sift through our panel of lenders to find the best possible used or used car deal. We’ll also link you with a dedicated account manager to help make your life easier.

Can you finance a used car?

Financing a used or used car isn’t too different from funding a new one. The principles are the same. You’ll spread the total cost of the vehicle, plus interest and admin fees, over a contract term – typically two to five years.

The main benefit of financing a new car is that you’re buying straight from the manufacturer, meaning you’ll likely have a better warranty. As you’re buying direct, you can often take advantage of low-interest promotions and 0% deposit deals. Unfortunately, the downside is that it costs an arm and a leg to finance a new car!

The car loses value as you drive off the forecourt.

Remember, when you finance a second hand car, you can still take advantage of any time left on the warranty – even if you didn’t buy it from new.

Can I get a used car finance deal with a bad credit score?

In this day and age, so many of us have problems with our credit ratings. As such, there are lots of lenders out there who have started to offer used car finance deals to those with poor credit scores.

We’d recommend looking into a Hire Purchase deal for someone with bad credit, as it’s a secured loan – if you don’t pay, the lender can reclaim the car. The lender has more security, making them more likely to lend to you.

The downside of having a bad credit score is that you’ll likely pay a higher interest rate, meaning you’re paying more to borrow.

We can help you find a decent second hand car finance deal even if you have bad credit. We’ll do all the legwork and reach out to our panel of lenders to see what deals you’re eligible for.

We’ll also link you up with a dedicated account manager, who’ll be able to guide you through the process.

Why should I use finance to buy a used car?

Used car finance isn’t just for people who can’t afford to buy a car outright.

There are a lot of benefits to financing a car:

  • You can spread the cost of the car out over a few years, meaning a predictable and consistent monthly payment.
  • You don’t have to spend a lot of cash at once. Even if you have enough in your savings, you don’t need to spend it all! There are also lots of 0% deposit used car finance deals available, meaning you can keep your savings for something else (like a house deposit).
  • We’ll do all the heavy lifting for you and find the right deal.

What types of used car finance are available?

When it comes to used car finance deals, there are lots of options out there. Our panel of lenders tend to offer two main types of car finance: a Hire Purchase (known as an HP) deal or a Personal Contract Purchase (PCP) deal.

They are similar in that they involve a monthly payment over several years. However, there are some significant distinctions.

Hire Purchase

With a Hire Purchase deal, you basically ‘hire’ the car from the lender on a long-term basis, usually up to 5 years. Crucially though, you are paying the car off!

After your contract term ends and you’ve paid your last repayment, you’ll own the car outright. You can then do what you want, including selling the car. The other significant advantage of a Hire Purchase is that you don’t have a mileage limit, so you can drive as much as you want

While you will eventually own the car, you’ll find that Hire Purchase deals require a higher monthly repayment when compared to a PCP. To reduce your monthly payments, you have the option to put a bigger deposit down.

Before considering a Hire Purchase, decide whether you want to own the car long-term.

Personal Contract Purchase

While a Hire Purchase is pretty straightforward, a Personal Contract Purchase is a little more complex. However, that does mean you have more options!

With a PCP deal, you sign up for a contract term of (usually) 2 to 5 years and make monthly repayments. Your monthly payments will be lower than with an HP deal, as you don’t necessarily need to buy the car at the end of the agreement. You’re essentially paying off the car’s depreciation, not just the vehicle’s value.

Once the PCP deal is over, you can:

  • Hand the car back, and put any positive equity towards a new PCP deal.
  • Hand the car back, and walk away!
  • Pay a balloon payment to own the vehicle. Usually a sizeable sum (typically a few thousand!).

If you’re 100% sure you want to own your car at the end of the deal, you should opt for an HP deal. If you need lower monthly repayments and don’t care about owning, or if you’re not sure yet, a PCP is a good option.

One downside of a PCP offer is that you’ll be subject to set mileage limits. You’ll have to pay steep penalties if you exceed the annual mileage limit.

There are some other options for used car finance deals.

Personal loan

Ahh, the old-fashioned option! A personal loan is where you borrow money from the bank. The loan is unsecured, meaning it’s not linked to the car. If approved, you’ll owe the bank the money back, plus interest: no matter what you do with it!

The advantage is that you’re paying in cash at a car dealership. You won’t have to worry about finding a dealer with a good finance deal. Find the car you want, haggle the price down, and enjoy!

You also have the freedom to modify the car as much as you want or sell it.

The downside of a personal loan is that it can be challenging to get approved for and requires a decent credit history. Likewise, interest rates can sometimes be cheaper with a car dealer.

Guarantor loan

A guarantor loan works the same as a standard loan, except it involves a third party. A guarantor is someone (usually a family member) who signs up to pay for the loan if you don’t.

This option is popular for those with a poor credit rating or a sparse credit history. Unfortunately, none of the lenders currently offer a guarantor loan option.

Can you get a 0% deposit deal on used car finance?

You sure can! Many of our lenders offer used car finance deals that don’t require a deposit. Helpful if you need to get your hands on a reliable car but don’t have much in the bank right now.

It’s important to know that your monthly payments will be higher if you don’t put down a deposit.

Can I get 0% financing on a used car?

In general, you’ll only find 0% deals on new cars as they’re being offered directly from the manufacturer. Unfortunately, getting a 0% deal on a used car from a dealer is pretty much unheard of.

Put simply, if there’s no interest, the dealer can’t make any money from the transaction!

Will a used car be cheaper overall?

In most circumstances, yes! A vehicle car is typically far more affordable than a new car. You don’t borrow as much cash. You’ll also find that a used car will depreciate less aggressively, lowering the cost of financing.

Tips for buying a second-hand car

Buying a new car is a more relaxed experience than purchasing a used car. When buying a vehicle car, you must have your wits about you.

Make sure to buy as new and low mileage a car as you can afford. While some wear and tear are normal, it’s essential to carry out a few checks:

  • Inspect inside and outside the vehicle. Look for any significant dents, scratches, or tears in the upholstery, and check all the electrics work. When looking at the exterior, take a close look at the panelling. If one panel looks different from the other, it could be a sign that the car has been in a crash.
  • Pop the bonnet, and check that the vehicle has satisfactory oil levels.
  • Always take the car for a test drive! Pay close attention to how the clutch feels, the brake responsiveness and its sound.
  • Carefully check your documents. Ensure you get a V5C handbook and that the car has a full service history.

What’s next? How to apply

Ready to take out a used car finance deal? We’re here to help.

No matter what you’re looking for, we’ll be able to find you the right deal for you.

To begin, make an application, and we’ll give you a no-obligation quote. You’ll then receive approval in principle – meaning we can find you a deal based on the information you’ve provided us. Of course, this is subject to your credit rating.

To keep you right, we’ll assign an account manager to help walk you through the process and your finance options.

Get a quote!

Are you looking for used car finance? Complete an application here, and we’ll give you a no-obligation quote.

Applying only takes a couple of minutes and won’t affect your credit score.

FAQs - Used Car Finance

Rates from 8.9% APR: the exact rate you will be offered will be based on your circumstances, subject to status.

Representative example: borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed), and a deposit of £0.00, the amount payable would be £166.07 per month, with a total cost of credit of £3,464.37 and a total amount payable of £9,964.37.

We look to find the best rate from our panel of lenders and offer you the best deal you’re eligible for. We don’t charge a fee for our service, but we earn a commission. This does not influence the interest rate you’re offered in any way.

Autedia Limited is a credit broker and not a lender, authorised and regulated by the Financial Conduct Authority (Firm Reference Number: 948436). You can check the authorisation on the FCA Financial Services Register.