Purchasing a used car can be an exciting time, but as a considerable financial investment, you’ll want to make sure the make and model you choose is affordable too. Financing your used car can prove a more cost effective way of paying for the vehicle, as long as you can manage the monthly repayments.
Car finance can be confusing, so we’ve explained everything you need to know about financing a used car within this article. Find out how car finance works, what car finance options are available to you, and our top tips when it comes to securing car finance. Read on to find out more…
What is used car finance?
Finance is a way of funding a used car without having to find the money upfront. Lenders across the UK specialise in providing used car finance to customers via a number of options, such as Hire Purchase (HP) and Personal Contract Purchase (PCP) - we’ve explained more about these, below.
How does used car finance work?
Financing a used car works in much the same way as it does if you were to finance a new car. First of all, you need to work out your budget so you can determine how much you can afford to repay per month. The next step is to find the right type of used car for your needs before applying for car finance.
Used car dealerships like ourselves work with a whole host of lenders across the UK to help secure the best finance deal for your new-to-you vehicle. Decide whether you wish to own the car at the end of your finance agreement, or if you would rather lease the car with no intention to own it at the end.
The lender will assess your application before deciding if they will approve the loan, or if they deem you to be too much of a credit risk. All being well, your used car finance application will be approved and then all that’s left to do is pick up your vehicle.
What used car finance options are available?
There are two popular used car finance options that are widely available to customers, they are:
Hire Purchase
The most common form of used car finance is the Hire Purchase (HP) option. Opting for this type of car finance means that you will eventually become the owner of the vehicle at the end of the agreement. There is no ‘final payment’ option or ‘balloon payment’, so overall you will make higher monthly repayments compared to a Personal Contract Purchase.
Personal Contract Purchase
Considered a popular choice of used car finance, Personal Contract Purchase (PCP) is a very flexible option. Depending on the initial upfront payment agreed, your fixed monthly repayments will vary. It’s important to understand that during the payment term, the lender is the legal owner of the car. At the end of your contract you’ll be offered three options:
- To pay the outstanding amount owed on the car in order to become the legal owner of the car (this is also referred to as a ‘balloon payment’).
- Part-exchange the car, using the equity gained to begin a new finance agreement on a different car.
- Return the car to the dealership and make no further payments.
Due to the flexible nature of a PCP agreement, payment terms can vary from 18 months up to 48 months as standard. This means that customers who opt for a PCP deal can often secure lower monthly repayments compared to a Hire Purchase agreement.
Why choose to finance a used car?
Fast becoming the preferred option for motorists in the UK, choosing to finance a used car is helping many drivers who would otherwise not be able to afford an upfront single payment. ‘Owning’ a used car on finance means that you can spread the cost over a series of manageable monthly instalments, while giving you the option to own the car at the end of an agreement, or part-exchanging it for a newer make and model.
Our used car finance top tips
When it comes to applying for used car finance, you’ll want to make sure that you are in the best possible position to be approved. With that in mind, we’ve shared our top tips to getting approved for and being offered the best-value used car finance…
- Always read the small print! We know it can feel like a chore, but it’s really important to understand the terms and conditions of the contract so you don’t get caught out.
- Aim to get the lowest APR (interest rate) available to you.
- If you’re approved for used car finance with a poor credit rating, be aware that this may be subject to a higher interest rate.
- Consider investing in a GAP insurance policy as this can save you thousands of pounds if your car was to be written off during the agreed finance term.
- Be realistic about what monthly repayments you can afford, as failure to keep up with the payment plan may result in the car being taken away.
- Check your current credit score using a recommended credit reference agency to discover what bracket you fall under - the higher the score the more likely you are to be approved for finance!
- Sourcing a guarantor may be an option if you have poor or bad credit.
- Don’t make too many applications for used car finance, as this can actually prove detrimental to your overall success and chances of being approved.
Used car finance for customers in Lincolnshire and beyond
As specialists in the sale of used cars, here at Windmill Motors in Bourne, Lincolnshire, we are best placed to provide used car finance to our customers. As such, we work hand-in-hand with leading lenders from across the UK to source the best possible deals.
Whether you wish to explore our Hire Purchase (HP) or Personal Contract Purchase (PCP) finance options, we can help you. We do offer zero deposit car finance, or if you have a vehicle for part-exchange, the value can be used as an initial deposit thanks to our cashback incentive.
We understand that you may have a poor credit rating, so we will do our best to help secure finance on your next used car. Some of the lenders we work with specialise in providing used car finance to those with bad credit, so please do get in touch with us to explore your options.
In the meantime, take a look at our current stocklist of second-hand cars online which are available from the Windmill Motors showroom in Bourne, Lincolnshire. When you find the car for you, take advantage of the free finance check displayed alongside the model to discover your eligibility for used car finance.