Compare car loans for used cars

A pre-owned vehicle could be the right choice for your next car. Find out how you can finance a used car.

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.

Car finance from Zuto

Zuto is a credit broker that matches people to a finance package that’s right for them, to buy any car from any dealership.

  • No broker fees
  • Free car history and value check
  • Buy any car from any dealer

Representative example: Representative 19.8% APR. Based on a loan of £5,500 over 4 years with monthly repayments of £163, a total cost of credit of £2,283 and a total amount repayable of £7,783.

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Finder.com is a credit broker, not a lender, for consumer credit products. Our services are provided at no cost to you, but we may receive a commission from the companies we refer you to.

3 types of loans you can use for a used car

You have several options available when it comes to finding a loan for a used car. Some of these include:

  • Hire purchase loan. Hire purchase loans are among the most common car loan on the market in the UK today. You can secure a reasonable monthly repayment plan and on the last payment the car will be yours. However, if you default on the loan, the lender can repossess your vehicle. Always read the terms and conditions to see if you can use your used car as collateral, as some lenders have restrictions.
  • Personal contract purchase. PCP is also a highly popular option. It offers low monthly repayments but you will have to pay off a lump sum at the end of the contract to own the car.
  • Unsecured personal loan. Unsecured personal loans are generally offered to customers with good credit. These loans don’t require you to offer your car as collateral for the loan, but can result in higher interest rates and additional fees.

Should I put down a deposit on a used car?

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

What are the pros and cons of using a car loan to buy a used car?

Pros
  • You don’t need the full amount to buy the car.
  • You can get a great price on a used car by negotiating a private sale or at a dealership.
  • You have various financing options to consider — both secured and unsecured.
Cons
  • Could pay a high monthly repayment with high interest rates.
  • Used car financing can be more expensive and restrictive than financing for new cars.
  • You could be buying a car with lots of problems.
  • The age of the used car affects its resale value.

Key features of car finance options to compare

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:

  1. Interest rate. The first thing to consider is the interest rate. Compare your options to find the most competitively priced and packaged loan.
  2. Fees. Lenders can charge a range of fees on used car loans — termination fees, loan maintenance fees and more. Review all the extra costs that come with your used car loan.
  3. Flexibility. Can you make additional and lump-sum payments during your loan term? Are you able to repay your loan early without penalty?

How long will it take to pay off my used car loan?

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.

Can I get a used car loan cheaper than car dealership finance?

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:

  • Total payable. Dealership finance can involve attention-grabbing interest rates to get you in the door, but you should still shop around. By comparing the total payable, you’ll be able to take into account any fees that the finance companies might prefer you didn’t notice.
  • Down payments. Dealership financing generally requires a down payment and is usually a couple of thousand pounds.
  • The price of the car. Sometimes dealerships offering good financing promotions can’t give as good a deal on the price of your vehicle — it pays to negotiate the price before securing your loan.
  • Extras. This shouldn’t affect the price of the actual finance amount, but you should consider the value of extras like additional insurance or an extended warranty.

Bottom line

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.

Frequently asked questions

*Disclaimer: The offers compared on this page are chosen from a range of products finder has access to track details from and is not representative of all the products available in the market. Unless indicated otherwise, products are displayed in no particular order or ranking. The use of terms ‘Best’, ‘Top’, ‘Cheap’ including variations, are not product ratings and are subject to our terms of use. You should consider seeking independent financial advice and consider your personal financial circumstances when comparing products.

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