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What Used Car Loan Finance Rates Should I Expect?

If you’re planning on financing a secondhand car, what used car loan finance rates should you expect? It’s important to have an idea of what rates will be offered to you by car finance companies so you can have an estimate of the costs. This way, you’ll be able to prepare your finances for the deposit, monthly repayments, and other car-related expenses. Let’s dive in and learn about the average used car finance interest rates. 

What Influences Car Finance Interest Rates?

The average interest rate for car finance depends on a number of factors. Some of them are the type of car finance you choose, whether you’re buying a brand new or used car, your credit score, the amount you want to borrow, and how long your repayment term will be. Before you sign any car finance agreement, it would be wise to know what the average car finance rates are so that you can adequately prepare your budget for it. 

While you’re still shopping around for the best car finance deal, it would be quite impossible to know the exact figure of the interest rate that the lender will charge. Car finance companies advertise their annual percentage rates, however, do bear in mind that these are merely the representative APRs. It means the actual APR that they’ll charge on a specific borrower might be different. 

Average Used Car Finance Rates 2022

Knowing the representative APR and the average used car finance rates is a good start when looking for the most suitable car finance deal for you. Here are the average rates for used car finance, depending on your credit score.

  • 300 to 500 - 20.99%
  • 501 to 600 - 17.29%
  • 601 to 660 - 10.48%
  • 661 to 780 - 5.58%
  • 781 to 850 - 3.71%

As you can see, the higher your credit score, the lower the average interest rate for financing a used car. Your credit score can influence the interest rate that the lender will offer because your score is a figure that represents your creditworthiness. If you're applying for used car finance with an excellent credit score, the car finance company will perceive you as someone who is responsible when it comes to handling finances and that they can count on you to make your repayments on time. 

How to Calculate the Cost of Car Finance

If you want to calculate the cost of financing a used car by using the interest rates provided above, you don’t have to do the math manually. Instead, try visiting the websites of car finance companies and using their car finance calculators. It’s the simplest, easiest, and fastest way to get estimates of how much you need to prepare to finance a secondhand vehicle. A quick online search using the term “car finance calculator UK” will give you tons of results. Feel free to check them out and hopefully, you’ll be able to find the right deal for you.

What’s the Best Way to Finance a Used Car?

Personal Contract Purchase

With PCP used car finance, you typically have to pay a deposit upfront which is at least 10% of the car’s value. After that, you would then have to make monthly payments for a set number of months, depending on your contract term with the car finance company. When you reach the end of your agreement, you have the option to buy the car by paying a balloon payment, return the vehicle and pay nothing else, or use the remaining equity of the car for another PCP deal. 

A PCP car finance deal is a good choice if you want to swap your car for another one every couple of years. The monthly payments are also usually lower compared to Hire Purchase because you won’t be paying for the full price of the car, instead, your payments go toward the predicted value that the car will lose throughout the duration of your contract. If you’re not yet sure about owning a car but you want to enjoy the convenience of having your own ride, you may consider financing a used car with PCP. 

Hire Purchase

HP car finance is much like PCP because you’ll also pay a deposit initially and then make monthly repayments afterwards. The main difference here is that by the time your HP agreement ends and you’ve made all the payments, the car will be yours to own. The amount you’ll pay every month will be higher than PCP but this is because you won’t have to pay a balloon payment in the end so you could own the car. 

If you’re sure about owning a car, HP car finance is the best choice for you. Some of the advantages of this type of car finance are no mileage limits, no lump sum payment to own the car when your agreement ends, and there’s usually a bigger selection of secondhand cars available for HP financing. 

It’s easy to think that a brand new car is the best choice but if you look at its practicality, it’s usually better to finance a used car. It’s much more affordable, you can have a better model with upgrades for the same price as its brand new counterpart, and there are so many used cars that are in great condition, especially if you choose ex-demonstrator cars that haven’t been really used that much. 


Before a lender can provide you with the exact car finance interest rate that they’ll charge, they’d have to conduct a hard search on your credit report first. For quotes and estimates, they can also do a soft search, but then again, these would only be estimates. To make sure you get the best car finance offer, work on boosting your credit score because it has a great influence on the interest rate that the lender will apply on your car finance deal. 

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