Can I Get Car Finance On A Second Hand Car?

Second-hand cars can provide excellent value for money, but it can still be difficult to find the cash to purchase one outright. 😀 So, can you borrow the money you need to buy the second-hand car of your dreams? 🤔

If you are wondering whether you can get finance on a second-hand car then you’ll be pleased to know that car Finance is not limited to new vehicles. There are several finance options that you can use to buy a second-hand car. Most vehicles depreciate over the years, making used cars much cheaper.

Due to demand within the market, dealers readily offer competitive packages for both new and used cars, but with slightly different rates and terms. So, it's a good idea to look around first and find the best deal. If you can't afford to pay outright cash for the vehicle, you can sign up with lenders to help you spread the cost of your second-hand auto.

What Are the Financing Options for Used Cars?

Before applying for car finance, examine your income and outgoings to determine your car finance affordability. You should also familiarise yourself with how car finance works so you know what to expect.

Ready to learn more about getting finance on a second-hand car? Here’s a rundown of your main financing options.

Personal Contract Purchase (PCP)

PCP finance is popular with second-hand cars compared to hire purchase and a loan. With this contract, the monthly payments only cover the depreciation cost within the contract term. This means the borrower makes lower monthly payments.

A PCP deal requires the buyer to make an initial deposit and set a mileage limit for the length of the contract. To make lower monthly payments, you can make a sizeable down payment, take a more extended warranty or maintain a lower mileage limit.

At the end of the contract, you have three options: either hand back the car, make a "balloon", or final payment that gives you the car ownership, or trade the vehicle for a new one.

So, are PCP deals a good idea?

Getting PCP car financing for a used car is very popular because of its affordability. Used cars have already lost most of their value compared to new vehicles. The most significant depreciation comes in the first year. Because PCP monthly payments cover the difference between a car's value at the start and the end of the contract, it's more affordable than taking finance for a new car.

Furthermore, the optional final payment is lower when the contract ends, making it a much cheaper option overall. However, if you exceed the mileage limits or damage the car, you must pay the dealer penalties. Do check out what these might be before you sign up.

Hire Purchase (HP)

You can also opt for a hire purchase plan when buying a used car using car finance. With HP, you must also make an initial deposit, usually a minimum of 10%, and keep up with subsequent monthly payments over the agreed contract time. Once you have completed all the payments, you fully own the vehicle, with nothing further to pay.

These monthly instalments will be determined according to the length of your loan term, your down payment, and the vehicle's price. Depending on your financial situation, you can make a larger deposit or pick a longer loan term to reduce your monthly payments. However, borrowing over a long time is only advisable if your car is a few years old. 

Is HP good for car finance?

HP can be a better option for car finance than PCP financing; you won't need to make any final balloon payment. This means your monthly payments will be higher than with a PCP agreement because you are paying the total borrowing costs to buy the car within the monthly sum. However expect the repayments to be a bit higher as you will be buying the car in full. If you can afford this option, this may suit you better if you don't want to have to find a lump sum to own the car further down the line. 


A leasing agreement is most used with new vehicles. However, some dealers still provide this as car finance for a second hand car. The terms and conditions for both are usually similar. Once you identify a vehicle you like, you pay monthly over a set contractual period.

Like a PCP plan, the agreement includes mileage limits and guarantees that you will return the car in good condition at the end of the contract. The dealers set up monthly payments based on the expected depreciation value.

If you choose this car financing option, it may be more expensive. For second-hand cars, it's harder to determine the depreciation value than for a new car. Therefore, lenders may charge higher rates to cover a potentially unexpected depreciation rate.

You need to ask yourself, is it financially smart to lease a car?

Leasing a car will be more expensive in the long term than buying one. However, it can be financially smart for those who do not have the funds to make an outright purchase, or for those who like to regularly change or update their vehicle. 

Personal Loan

Getting car finance for a second-hand vehicle from the bank should be the last option if your dealer doesn't have the used car package. The bank or credit union will set a monthly payment that includes interest that needs to be paid monthly.

This alternative comes in handy if you don't have a deposit for PCP or HP financing. (Although you can also get zero deposit HPs too if your credit score is good enough.) You also own the car during the contract term, allowing you to alter or sell it as long as you keep paying back the loan. However, you will need to have a decent credit score to get car finance.

The personal loan will cost you more monthly than a PCP because you are paying for the borrowing in full,  not just the car’s depreciation rate.

Used Car Tips

New cars come in perfect condition. Therefore, when going for second-hand cars, there are crucial things that you need to pay attention to.

What's Your Budget?

Check whether you can afford the monthly payments when buying a used car. Remember, you must also cater for repairs, fuel, road tax, insurance, and any associated costs, such as parking. And with an older vehicle, there may be no warranty and possibly more unexpected repair bills. 

How long does it take to finance a used car? 

Getting car finance for a used car is catered for by most dealers and many other lenders. The financing period depends on your agreement with your lender, but most people spread the cost over 2 to 5 years. Many lenders require the car to be less than a certain age by the time you have repaid your loan. 

Is a dealership better than a private seller?

Buying a used vehicle from a dealership is preferable to a private seller unless you are a professional car expert. Dealers have a professional approach to properly vetted cars. They will service the vehicle before you buy and may offer a 12-month or extended warranty. They could also provide financing options during the purchase. With a private seller, you may be able to get a car finance deal - although this may be more difficult, or if not, you would have to go for a personal loan or cash.

What are the interest rates?

The APR charged on used car borrowing differs from lender to lender. Before signing any agreement, shop around; you might get a better rate than the first one offered.  

Is the used car in good condition?

When buying a used car, you must be concerned about its condition. Check it out before you agree to a sale. You can also have an HPI check in the UK to get the vehicle's history and details of any outstanding loans attached to it before driving off. But what if something goes wrong like your engine blows? It could happen, and our in-depth blog explains everything you need to know about car finance when your engine is blown.


So, is taking out finance for a used car a good idea? If you plan to save some money, the answer is yes, as a second-hand one can be outstanding compared to a brand-new one.  Applying for car finance for a second-hand vehicle will be cheaper than going for a brand-new, shiny set of wheels. 

There are several options out there for you to choose from when deciding how to finance the cost of your car. Here at Carmoola,  we made it convenient and straightforward for you to apply for car finance. However, we currently only provide HP deals and car loans and not PCP deals. If you want to know more, contact us today.

The application process is done fully within our app, and you will receive a decision on whether we can assist you within minutes of completing your application! 🚗😁