If you want a car, you may wonder about the best way to fund your next purchase. The used car finance market is booming, and more people than ever are turning away from brand-new cars and opting for second-hand vehicles. There are many benefits to buying a used car, such as a lower purchase price, huge choice, and availability. However, some drivers question the cost-effectiveness of getting a used car finance deal. The guide below has been designed to explore the benefits of getting a second-hand car loan and how to find the cheapest used car finance deal for your circumstances.
How does used car finance work?
Financing a used car works in the same way as any other form of finance. Three types of car finance deals tend to be most popular amongst drivers:: a personal loan option, a PCP deal, and a hire purchase agreement; each has its structure and can suit different circumstances better. However, they all have the same underlying principle. If approved for finance, the lender will borrow the money to buy a car or finance the vehicle’s value. You then make monthly payments till the end of the agreed term. It’s worth remembering that car finance is a legal agreement, and it’s important that you can meet each payment on time and in full. If not, it can lead to the car being taken off you and more serious financial implications.
Who can get car finance on used cars?
No matter your financing, you must undergo a credit check to prove your creditworthiness. Lenders use a car finance check to see how you’ve handled credit in the past and the likelihood of you paying your loan back on time and in full. A good credit score indicates good financial management and past payments made on time and in full. Usually, people with better credit scores get access to the best car finance rates as they are less risky to lend to. However, bad credit finance doesn’t have to be expensive, and choosing a used car can be beneficial. When you apply for car finance, lenders consider other factors ability, like license type or employment status.
Benefits of aking out a used car finance deal:
There are many reasons drivers choose to get a used car through car finance. Not only is the loan amount usually smaller than a used car, but there is also an abundance of vehicles to choose from on the second-hand market.
Smaller loan amount
Used cars always tend to have a lower purchase price than a brand-new scar and a lower loan amount isfornancing. Finance agreements such as hire purchases and personal loans are based on the car’s value or a loan that equates to cover its value. This means a lower loan amount helps to reduce your monthly payments and make the deal more manageable. A smaller loan amount may mean that you can also afford to pay off the loan faster. The shorter the loan term, the fewer months you spend paying interest on your deal, saving you money in the long run.
Huge car choice
You’ll not be stuck for a choice when it comes to the used car market. There are so many cars to choose from! If you’re looking for a reputable used car to finance, you will probably have to find a trusted dealer. Most car finance agreements require a car from a dealer, but you could get a car from a private seller if you use a personal loan. However, using a car dealership means you get an extra layer of protection and also shop multiple cars at one site.
Slower depreciation rate
When you choose to get a used car, you decide to prolong its value. This is because many new cars lose up to 50% of their value in the first year. After the third year of ownership, the depreciation rate is slow. This means you won’t be hit as hard or left at a loss you won’t be hit as hard or left at a loss when you come to sell the car after you’re done with it.