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When you buy a new car, it loses 20% of the value the moment you drive it away. When you buy a pre-owned car, you have more room to negotiate on the price because of any defects it might have.
But if, like most of us, you don’t have the funds available in savings to buy your next car outright, there are finance options available which allow you to spread the cost of a used car over a time frame that suits you.
If you’re buying through a dealer, there’s a good chance they’ll be very keen for you to sign a finance agreement using a finance company they’re partnered with. However it’s always smart to compare your options and find the cheapest finance you’re eligible for.
Warning: late repayments can cause you serious money problems. See our debt help guides.
You have several options available when it comes to finding a loan for a used car. Some of these include:
The dealer may ask for a deposit if you don’t have financing available after you negotiate the purchase price, but that doesn’t mean you have to settle for the dealer’s terms. Every step of a car purchase can be negotiated, and that includes your deposit. You’ll also want to make sure that the deposit is refundable if the deal falls through.
Read the terms of your contract carefully. If the paperwork says a deposit is non-refundable, ask the sales manager to change it so that it will be refunded for any reason. If you plan on having the vehicle inspected or might not be able to secure financing, you’ll also want these contingencies outlined in your contract. This way, if you have to back out of the sale for any reason, the dealer can’t keep money it didn’t earn.
If you’re sure you want to go ahead, it’s a good idea to pay the deposit using your credit card. That’s because, unlike other methods of payment, credit card transactions between £100 and £30,000 are covered by the Consumer Credit Act. If the vehicle is not sold as described and the vendor refuses your refund request, you may be able to dispute the transaction through your card issuer
Securing the right finance is as important as finding the right car. Some car loan terms extend up to seven years, so it’s quite a commitment. Here’s what to keep an eye out for when looking for the right financing:
The average used car loan is shorter than a loan for a new car. Loan terms vary between lenders, but it’s usually between one and seven years. Longer loan terms can reduce your monthly repayments, but you’ll pay more interest, making your loan more expensive in the long run.
Take a look at the following features of both the loan and car dealership finance offers to find out which one is the better deal for you:
Don’t just sign on line when a dealer puts a finance option in front of you. Compare your options to get the cheapest financing available to you.
Whenever you apply for a used car loan, take the time to read the small print. It’s important to be aware of all fees and charges, as well as any restrictions on the vehicle or loan.
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