Over How Long Should I Finance My Used Car?

Though the used car market suffered a blow during the pandemic, buying a used car instead of a new one is now becoming increasingly popular in the UK. Maybe this is prompted by sustainability concerns, or even post-COVID purchasing - whatever your reason to buy a used car is, you’ll have to decide how you’re going to purchase it. 

You could buy your next used car in cash, or you could go for car finance, which will allow you to spread its cost over a certain period of time. Ah, yes, that’s the tricky part. When you finance a used car, how long should you be making your loan? For how many years can you finance a used car? Let’s explore! 😎

Also check out our video on the subject featuring the lovely Jade....








What Is a Car Loan Term? 

A car loan term refers to how long you will have to pay back the amount of money you’ve borrowed. You could also call this your repayment period - the number of months you will have to send a repayment amount back to your lender. You’ll find that typical car finance terms will be between three and four years. In fact, the average car loan term is 54 months, or slightly over four years. Some lenders offer loan terms up to seven years, or 84 months, which you may think is a good thing - having much longer to repay your loan sounds amazing, right? Well, spoiler alert, it’s probably not. Let’s look into the best car loan term for used cars. 

Can You Finance a Car for 7 Years? 

Used cars are generally way cheaper than newly manufactured ones, so they’re often a more affordable option. However, you may still find yourself in a situation where you can’t afford to cash out the price of a car in one go, you’ll be able to buy your used car using car finance. Getting a car loan means that you can spread out the cost of your car over a certain number of months or even years. 

So, when figuring out whether or not it’s a good idea to finance your car over seven years, there are actually several factors to consider. First of all, you’ll find that the longer your car term is, the higher your interest rate will be as a result. Making your car loan term longer will reduce your monthly payments, but you’ll find that you’ll actually be paying more in interest rates in the long run. Let’s go more into detail. 

The Relationship Between Interest Rates and Loan Terms

The general rule with both used and new car loans is the following: the longer the car loan term, the lower the monthly repayment amounts. That means that borrowing money over a longer period of time means that you’re reducing how much money you’ll have to pay out each month. 

However, because you’re borrowing money from your lender over a longer period of time, you’ll be charged a higher interest rate. Therefore, you’ll effectively be paying more money for your loan than if you had stuck with slightly higher monthly repayments. For example, if you pay your loan back within twelve months, you’ll find that your monthly repayment amounts will be pretty large (depending on the car you buy) but you’ll have a really low interest rate (depending on your personal circumstances). 

Can You Finance a Car for 10 Years? 

As discussed above, you can finance a car for as long as your lender allows, which will rarely be more than 10 years. Typically, car loan terms are four or five years. Getting a car loan with a much longer term isn’t recommended because you’re just going to end up paying a lot of money in interest rates. And if it's already a used car, you might even end up owing more than the car is worth further down the line.  However, you’ll also find that which type of car finance agreement you go for has an influence on your loan term. Let’s go over the two main different types of car finance agreements for used cars. 

Hire Purchase for Second-Hand Cars

With a Hire Purchase (HP) agreement, the monthly payments will be higher than that of a Personal Contract Purchase deal. It’s because after you’re done with the payments, you don’t have to pay for the balloon payment. The car will be yours as soon as your contract ends and once you’ve made every single payment. The loan terms for HP cars are usually 12 to 60 months or one to five years. 

Used Car Personal Contract Purchase Deal

With a Personal Contract Purchase (PCP) deal, while your monthly repayments will be lower, you’ll have to pay an optional final payment at the end of your contract if you want the car to be yours. However, if you choose not to buy the car, you can return it to the car finance company. The car should still be in good condition and you should be able to stick to the agreed mileage limits, otherwise, you would have to pay other extra fees. The loan terms for PCP cars are usually 24 to 36 months long. 

The Benefits of Paying a Deposit

Whichever car finance deal you choose and whatever the contract length is, you might want to consider paying a deposit or downpayment. Paying a deposit of 10% to 20% of the car’s price can significantly lower your monthly repayment amount. You will also be paying less interest since you’re borrowing less money from the car finance company. However, do bear in mind that it’s not recommended to use up all your savings for a deposit. It’s always best to keep some spare cash for repairs, maintenance, and other costs of running the car. Emergencies happen more than we would like them to, right? 

At this point, maybe you’re thinking “how many years can you finance a new car”? Well, all of these principles also apply to new cars too. If you’re looking for more affordable monthly payments for a used or new car, you can go for a car finance deal with a longer contract term. The longer the length of the agreement, the lower the monthly payment amount. 

Do be careful about longer contract terms though because overall, you’ll be paying more interest since you’re borrowing money for a longer period. But if you’re more comfortable with lower monthly payments, you do have the option to get a 5-year contract. 

If you want to pay less interest, then go for a shorter car finance contract term. Once you’ve calculated your budget and checked that you can afford a higher monthly repayment amount, then it is definitely more practical to choose a shorter term loan. 


Now that you know your options when it comes to buying a used car, you’ll be more confident in your decision. If you want a more affordable monthly payment, go for a long-term car finance contract. If you want to pay less for the vehicle overall, then go for a short-term agreement. In both cases, it would benefit you if you can pay a downpayment upfront. 

Once you’ve chosen your car finance deal and the length of the agreement, you’ll be ready to apply for car finance. With Carmoola, you only need to use your smartphone to apply. To start, download the app and enter your personal details. Prepare your driver’s licence to verify your identity. In a few minutes, you’ll know if you can get financing from Carmoola. Got questions about Carmoola’s car finance deals? Feel free to reach out! We’d love to talk to you. 😻