How To Finance a Used Car in the UK

Navigating Your Way To the Best Deal

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Used-car buyers can now find nearly as many offers and choices as those looking for a new one, thanks to the huge popularity of car financing. There may be a finance calculator or a comparable tool on the majority of used-car websites to help you figure out how much you can afford, and because of an overabundance of low-interest loans, the outcomes might come as a surprise. Just remember to run a car history check before financing the vehicle to ensure it’s worth the money. Services like RegCarCheck can offer a comprehensive report for a full vehicle history.

Car dealerships that are larger, franchise companies usually offer the most competitive low-interest financing alternatives. If your perfect used automobile is available in a smaller dealership, but they are unable to provide you with an attractive finance alternative, a personal loan may be another option to update or improve what you’re driving.

Even if you go for one of the options above, it’s a good idea to get “Gap Insurance,” which reimburses you for the difference between the car’s cash value and how much money you’ll need to finish your payments in the event of an accident–amounts that can differ considerably. If the vehicle is written off, it will reimburse the balance owed on the lease, automobile loan or any other financing plan.

When financing a new or used automobile, comparing the annual percentage rate (APR) of the loan is an important step. You’ll learn how much interest will be charged, and what you’ll have to pay from this.

Dealer Finance for Used Cars

Larger, networked dealers may charge more than smaller garages or private sellers, but purchasing a vehicle from one usually comes with the security of thorough inspections and condition checks, as well as a warranty and a comprehensive service history.

Consumers are often attracted to nearly new, ex-demonstrator versions since they haven’t travelled very far, are high-spec models with better features, and are offered at a significant discount. When it comes to cars, the term “ex-demonstrator” is used to describe one that has been used by management or customers on test drives.

Many franchised and licensed dealerships have their own finance division. We have a comprehensive car loan guide, but one of the following is generally accessible:

Personal Contract Purchase (PCP): With a PCP, you make a one-time deposit followed by a set number of monthly payments (usually for three, four or five years). You have the option of purchasing the vehicle outright at the conclusion of the contract term by paying a “balloon payment” or returning it to the dealer. If you choose the latter, you’ll be able to use the equity you’ve built up towards your next vehicle’s deposit.

Hire Purchase (HP): A leasing agreement is essentially a PCP contract with one key difference: you become the outright owner of the vehicle at the end of the term and don’t need to make any further “balloon payments.” This means that each month, you’ll pay a greater amount since you’re paying for the car rather than depreciation expenses.

Larger, networked dealers may charge more than smaller garages or private sellers, but purchasing a vehicle from one usually comes with the security of thorough inspections and condition checks, as well as a warranty and a comprehensive service history.

Consumers are often attracted to nearly new, ex-demonstrator versions since they haven’t travelled very far, are high-spec models with better features, and are offered at a significant discount. When it comes to cars, the term “ex-demonstrator” is used to describe one that has been used by management or customers on test drives.

Many franchised and licensed dealerships have their own finance division. We have a comprehensive car loan guide, but one of the following is generally accessible:

Personal Contract Purchase (PCP): With a PCP, you make a one-time deposit followed by a set number of monthly payments (usually for three, four or five years). You have the option of purchasing the vehicle outright at the conclusion of the contract term by paying a “balloon payment” or returning it to the dealer. If you choose the latter, you’ll be able to use the equity you’ve built up towards your next vehicle’s deposit.

Hire Purchase (HP): A leasing agreement is essentially a PCP contract with one key difference: you become the outright owner of the vehicle at the end of the term and don’t need to make any further “balloon payments.” This means that each month, you’ll pay a greater amount since you’re paying for the car rather than depreciation expenses.

Car Supermarket Finance

Dealerships, on the other hand, are often less expensive than official dealerships since dealerships aim for a higher profit margin and sell nearly new cars. Car dealerships with a somewhat lower budget or the belief that they can obtain a better bargain may provide finance as well as other services.

Supermarkets may reduce prices by having a large number of automobiles on hand, with hundreds or even thousands of vehicles available at any one time. While this may help you save money when purchasing a vehicle, the process of negotiation and the quality of aftersales service are unlikely to be as pleasant.

Car dealerships usually provide PCP and Hire Purchase, although these are frequently supplied by third-party lenders. Before committing, make sure they’re FCA-approved to ensure you’re not taken advantage of.

Personal Loans

If you’ve discovered the ideal used automobile at a lesser  dealership, but they aren’t able to provide you with an appealing finance offer, a personal loan might be a viable alternative.

The most essential factor to consider is whether you take out a secured or unsecured loan. A personal loan that is secured involves using the value of your home as collateral. If you’re unable to pay back the money, your property could be sold to recoup the debt. Unsecured personal loans do not need collateral, but you must have a decent credit score to qualify. They typically come with higher interest rates and are for smaller amounts, if that’s the case. A guarantor loan might be one option for you if you’re young or have a bad credit history, but keep in mind that there are additional risks as well.

We recommend not to use a personal loan to finance a used vehicle. Our suggestion is to utilize a deal meant for the purchase of a vehicle rather than a personal loan since the APR is usually lower and, if something goes wrong, you’re unlikely to repossess the automobile itself. 

Tips for Getting a Used Car Financed

Regardless of the financing option you select, keep in mind that you are borrowing money and it comes with inherent dangers. Even if your circumstances change, you must always be certain that you can make the payments and fulfil them on time. Although there is occasionally the prospect of prematurely ending a contract, doing so may involve significant costs.

Ensure you thoroughly comprehend and understand any contract you sign up for, and always seek to obtain the lowest interest rate (APR) available.

There are several firms that specialize in finance agreements for individuals with bad credit histories, but be cautious since these might charge high-interest rates.

Regardless of the method you pick, if your car is written off in an accident, a Gap Insurance policy can save you hundreds of dollars.

Don’t pay more than you have to when purchasing an automobile. Shop around for the best rates; interest rates on used cars can differ dramatically, and it may be worthwhile obtaining a different vehicle if superior finance is accessible elsewhere.

Financing a used car in the UK can be a daunting task. There are many things to consider when choosing a lender and loan product. However, by doing your research and understanding the different options available, you can find the best deal for you and get behind the wheel of your dream car.