Used Car Finance Guide: What You Need to Know
So you're thinking about buying your next car? 🚘 The old motor served you well, but now it's time to move on. An upgrade, perhaps? Something a little flashier (but not too flashy, right)? Or maybe just the newer version of your current model? Whatever the vehicle type, thousands of drivers decide to buy a used car when purchasing their next set of wheels. And they often do it with finance. With that in mind, we've put this used car finance guide together so you can buy your next vehicle with confidence.
Can I finance a second-hand car?
Yes, you can definitely finance a second-hand car. The good news is that plenty of finance options are available for second-hand cars. Whether you're after one of the best Mercedes cars or a more affordable and practical car that fits your budget, you shouldn't have a problem finding a suitable deal as long as you meet the lender's requirements. All you have to do is decide on the type of finance you want to fund your purchase to kickstart the process.
What's the best way to finance a used car?
Personal Contract Purchase
Personal contract purchase, otherwise known as PCP, will see you paying a deposit upfront, followed by monthly payments for the duration of the contract. You also have the option to make a balloon payment at the end of the agreement. This involves you paying a lump sum to buy the car outright. If you don't wish to make the balloon payment, you may hand the keys back at the end of the term. Balloon payments allow the lender to keep monthly repayment costs down slightly.
Hire purchase car finance is more straightforward than PCP. It works similarly to a mortgage on a house, where you usually pay an upfront deposit followed by monthly payments for the duration of the loan. At the end of the contract, you become the car owner. However, you must pay back your outstanding balance if you wish to sell the vehicle during the agreement.
If you don't fancy owning the car, you can always lease it. A car lease is similar to a hire purchase. However, the main difference is that there's no option to buy the car you've leased. You'll pay an upfront deposit and make regular payments until the lease agreement finishes. At this point, the lender typically incentivises you to lease another car with them.
Many used cars are bought with a direct loan from a specialist lender. This is perhaps the easiest way to finance a car and involves borrowing the full amount and paying it back over the agreed period.
Whatever car finance agreement you choose, shop around first and look for a reputable lender with great interest rates. You may start by estimating the cost of borrowing a certain amount using a car finance calculator. Even if it's only an estimate, it will give you a good idea of how much you need to set aside monthly for the repayments.
What's the best length for finance?
The best advice from many finance experts would be, the shorter, the better. Car finance options tend to last anywhere between 12 months and seven years. The longer the loan length, the lower the monthly repayments. However, there's a catch here. Lengthier contracts often come with higher interest rates. So while you might pay a lower amount, it costs more over a longer period. The option you choose largely depends on what works best for you. If you have some cash to spare, it might be worth going for a shorter loan term. But if you'd rather keep costs down, explore a longer contract. Whichever option you go for, it's vital that you can comfortably make the monthly repayments.
How long will it take to get approved?
Until recently, you had to wait days and weeks to see if you'd been approved for car finance. Fortunately, those days are long gone; in most cases, you can get the green light for your application within minutes. That's certainly the case if you apply for car finance with Carmoola because you get the result instantly. Getting finance without the torturously long wait makes it possible for you to get the keys to your next car!
What car can I buy with Carmoola?
If you're considering using car finance to get your next set of wheels, you're in luck. There are plenty of options for financing a used car, whether you want something practical and economical or flashy with a large engine. Car finance is available and can help you get your next motor. You can buy virtually any used car model with Carmoola car finance. That means you can finance a second-hand Skoda and go the practical route or opt for something like a luxurious and undeniably sporty BMW M2. You could even finance a Porsche or Bugatti, though you should expect to pay a large monthly repayment sum. No matter what you choose, expect a wide variety of used cars available on finance. 👍