Used car finance: Everything you need to know

The cost of a car can be enough to make you want to just take the bus. But there are ways to reduce the outlay. Buying a used car on finance can indeed be a cheaper way to find a new ride, but there are some specific things to bear in mind if you go down the used car route.

Can you finance a used car?

Yes. Using finance to purchase a car is not just a way to cut costs on an expensive, new ride. It is also common to purchase used vehicles on finance.

One thing to note, the financing options available to you might be slightly different, depending on how you purchase your used vehicle. But don’t worry, we’ll get into that in this guide.

Is it a good idea to finance a used car?

If saving money is a key factor in your decision-making process, going for a used car can be a smart way to go. Getting a brand new, shiny ride straight off the showroom floor may make you feel good for a week, but it will lose value almost as soon as you pop it into first gear

So, if you have found the used car for you, but cannot afford the upfront cost, then using a financing deal could be worth considering.

How long does financing a used car take?

The length of time it takes to pay off the car will depend on what you agree with the dealer or lender who provides the finance to cover the initial cost.

How does financing a used car work?

There can be some differences to take into account when financing a used car.

The factor that affects the products available to you is where you buy the car from. New vehicles and used vehicles are both sold at dealerships, which usually offer - and can arrange - an array of financing options. But used cars are also commonly sold privately. In these instances, the financing options on offer are going to be more limited.

Buying from a dealer

Buying from a dealer might help put your mind at ease if you’re worried about the condition of your second-hand car. They usually have a used section, featuring cars that have been professionally inspected, so you know you’re not getting a motor on the verge of meltdown.

Dealerships will also open the door to a wider range of financing options: like hire purchase, PCP and more.

Private sales of used cars

Going private, or from smaller dealerships, can expose you to more risk. Unless you’re a mechanic or real petrol head, you might not be able to spot any faults with the car. On the other hand, you might be able to haggle yourself a cheaper deal.

As mentioned, private sellers are not set up to facilitate more complex financial arrangements. If you’re going private and looking to finance the purchase, a personal loan or paying with a credit card could be the only options available to you.

Can I finance a used car with no job?

This will be up to the lender. You may well be judged negatively if you cannot demonstrate evidence of a regular income.

Checking the car’s condition

On top of the cost of financing the car – deposit, monthly payments and interest – you should also factor in potential extra costs. If you’re buying a used car and want peace of mind that you’re not going to be left on the side of a motorway when you should be at your sister’s wedding, you might want to get an HPI check. This is a paid service which will scan the vehicle’s registration plate for previous write offs, MOT history and other factors that may put you off purchasing the vehicle.

Are used cars cheaper to insure?

There is no definitive answer to this question. In some cases, you may get cheaper insurance on a used car, as it will normally cost more for the insurer to replace a brand new, top of the line vehicle. However, a second-hand car is also more likely to breakdown, which could push up the costs. Along with these factors, insurers will tailor any plan to you as an individual, based on things like your driving history.

Picking the right option for you

Whatever way you choose to spread the cost of your new wheels, it’s a good idea to check your credit score and report. You’re more likely to get offered more favourable rates the better your score is, so it’s worth getting your credit score in shape before making any applications to help find the best deals. Read our guide to get tips on how to improve your score. And, once you’ve done your homework and you’re ready, you can search and apply for the right car finance for you, with our help.

Compare car finance