Used Car Finance
Looking to finance a used car? Learn all about your options and what it could cost with Asda Money.
If you’re buying a used car, you may be considering what finance options are available. Here we’ll look at how used car finance deals work, so you can understand which may best fit your financial situation.
What is Used Car Finance?
Used car finance is a general term for the different finance agreements that enable you to buy a used car. It can include Hire Purchase (HP), Personal Contract Purchase (PCP), or a personal car loan.
How Does Used Car Finance Work?
Used car finance works like this:
- Choose your used car: You’ll usually go to a dealership to look at the used cars on offer.
- Decide on financing and pick your deal: Consider the right used car finance option for you, whether HP, PCP, or a personal loan.
- Pay a deposit: You may need to pay a deposit at the start of your finance contract.
- Make monthly payments: You’ll make regular payments during the length of the contract. Depending on the type of finance you choose, you’ll either own the car outright or have the chance to buy it.
Pros and cons of Used Car Finance
Advantages
- You can spread out the cost of your used car
- You may be able to afford a more expensive car than buying it outright
- Taking out a personal loan may help boost your credit score in the long run.
Disadvantages
- Some used car finance options – like PCP – enforce a mileage limit
- With both HP and PCP, you can lose your car if you don’t make the monthly payments.
Types of Used Car Finance
The main types of car finance are:
- Personal loan: When you borrow the money as a personal loan, you buy the car outright and pay the loan off in monthly instalments.
- Hire Purchase (HP): You’ll pay a deposit to a finance company and make monthly instalments throughout the term of the deal. The car is yours once you’ve made the final payment.
- Personal Contract Purchase (PCP): You pay an initial deposit and make monthly payments to a finance company. You’ll need to make what’s called a balloon payment at the end of the contract to own the car outright. An annual mileage allowance will also apply. If you don’t make the payment, you can walk away from the deal or use the equity you’ve built up in the car to get a new PCP deal on a different car.
How much does financing a used car cost?
The cost of used car finance depends on the type of finance you choose, the size of the deposit you put down, and the interest rate from the lender.
Our simple used car finance calculator helps you understand how each of these factors can affect your costs.
What’s the cheapest way to finance a used car?
If you can buy a used car outright with cash, this is often the cheapest way. You’ll own the car outright from the start, won’t pay interest, and won’t need to make monthly payments.
When it comes to finance for used cars, you may consider a personal loan. You can likely spread the cost out over one to seven years and won’t necessarily have to put a deposit down. Depending on the lender, a personal loan may offer a lower interest rate than HP or PCP.
HP monthly payments are usually higher than PCP, but you own the car once you’ve made your final payment. Monthly payments on PCP might be lower, but you need to factor in the balloon payment at the end of the deal.
What’s the best used car financing option?
This depends on you and your personal circumstances. There are advantages and disadvantages of each.
Hire Purchase
Advantages:
- Own the car at the end of the contract
- Fixed monthly payments
- No excess mileage charges.
Disadvantages:
- Don’t own the car until you’ve made the final payment
- Higher monthly payments than PCP
- No option to sell or modify the car until the end of the contract.
PCP
Advantages:
- Smaller monthly payments than HP
- Flexibility to buy the car or hand it back once the contract is up
- Often available on more expensive cars.
Disadvantages:
- Large balloon payment at the end of the contract to own the car outright
- Miss your payments and you could lose your car
- Excess mileage charges if you go over your agreed annual amount.
Car loan (personal loan for the purpose of purchasing a car)
Advantages:
- Own the car outright from the beginning
- Option to sell or modify your car during the loan term
- Car loans give the option to spread payments over a longer period of time to reduce monthly payments. This does increase the interest you pay, however.
Disadvantages:
- Depending on the terms of your loan, monthly payments can be more expensive than PCP
- A poor credit history can make it harder to get a car loan.
Can I get 0% finance on used cars?
You may be able to get a 0% finance deal on a used car. Some dealers or car finance providers direct may offer deals with 0% APR for either the full length or part of the contract. You’ll likely need a strong credit score to be offered 0% finance for a used car. You may also need to pay a larger deposit or make higher monthly payments.
Do I need a deposit for used car finance?
Most forms of used car finance do require a deposit, whether you choose HP or PCP. This is usually around 10% of the purchase price. You may be able to get a PCP deal with no deposit, but you will likely need to have an excellent credit score.
How Asda Can Help
At Asda Money, we can help you find the right car loan from our panel of trusted UK lenders. Simply check your eligibility for a personal loan for the purpose of purchasing a car without it affecting your credit score.
Our wide panel of UK lenders will provide offers based on your personal credit situation and tailored to your specific borrowing needs. You can choose to go on to make a full application with a lender or take time to consider your options.
We also offer a free and impartial Financial Support service. If no offers are available to you, we can help you understand your options.
Compare used car finance using our trusted panel of lenders today!
Used Car Finance FAQs
Is it good to get a used car on finance?
If you can’t afford the cost of a used car outright, financing your purchase may be a cost-effective option for you. However, you will need to carefully read the terms and conditions of the deal and make sure you can afford the deposit and monthly payments.
What is the longest time to finance a used car?
PCP and HP finance deals typically last between three and five years. With a personal loan, you may be able to extend the loan up to seven years.
Why choose Asda Personal Loans?
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The Asda advantage
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Receive quotes from a trusted panel of lenders without harming your credit score
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A loan offer that’s right for you and your circumstances
Top Personal Loans FAQs:
- Why choose a Personal Loan through Asda?
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Customers could access great rates from carefully selected trusted lenders, so you can sit back and let us do the leg work. What’s more, when you search for a personal loan, you’ll only have a soft search on your credit history, which means you can check your eligibility without harming your credit score.
Once your loan is approved, you could receive your funds the same day.
- How does it work?
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Asda is in partnership with Aro which is a trading style of Aro Finance Limited, who are a leading credit broker to offer our customers a different solution to borrowing money and finding a loan. We work alongside Aro so we can provide our customers with the right offer from a panel of handpicked trusted lenders.
With one eligibility check, you can search a panel of carefully selected lenders and provide you with a loan tailored to your needs. Once you have been approved you will receive your funds which could be in your account as quickly as the same day.
So sit back, relax and let us do the hard work.
- Who are your lenders?
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We have carefully selected a number of trusted lenders to be on a panel. You can search the panel to provide you with the very best offer you are eligible for. Find out more about each of our lenders here.
If you have any questions on our lenders, please call our Customer Service Team on 0333 555 0560 and a colleague will be happy to help.
- How much can I borrow?
- Will applying affect my credit rating?
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No. One of the best things about our service is you get access to a panel of trusted lenders with no hard credit footprint left on your credit file. When you apply with us, a soft search is completed which doesn’t harm your credit score.
However, if you do proceed with an offer from your search with us, the lender will complete a hard search. This will show on your credit file.
- What credit score do I need for a bank loan?
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Strictly speaking, there is no minimum credit score for you to be approved for a personal loan. If you have a strong credit score, more lenders may be willing to lend to you with better interest rates on offer. If you have a lower credit score and have had problems borrowing in the past, you may find a smaller pool of lenders are willing to lend to you. You may even have to look for a specialist lender that offers loans for bad credit.
- Can I get a loan with a CCJ?
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If you have a county court judgement (CCJ) against your name, you may struggle to get a personal loan with mainstream lenders. However, you may find specialist lenders that are willing to lend to you.
- Can I borrow money with bad credit?
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If you have bad credit or have had money problems in the past, you may find that some lenders aren’t willing to lend to you. Those that are may only do so with higher interest rates. It’s worth looking at specialist lenders for bad credit loans. Or you can work on your credit score to improve it before applying for a loan.
- Why won’t my bank give me a personal loan?
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Lenders look at a variety of factors when deciding on whether or not to offer you a loan. They each have their own criteria which will take in your credit score, job, monthly income and more. If you have been rejected by a lender, you can always ask them why and hope they will give you some insight into their lending criteria. They may direct you to one of the main three credit bureaus to find out more information.
- Do personal loans look bad on credit?
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When you apply for a personal loan with a lender, this will show up on your credit file. Your credit score may take a very small hit in the short term once you take the loan out. But if you pay your monthly payments on time and in full, this can have a positive impact on your credit score.
- How to get the lowest rate for a personal loan?
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The interest rates offered by lenders depend on a range of factors including how much you’re borrowing and the length of the loan. They will also look at your credit score. To help get a lower rate, you can look to improve your credit score by signing up to the electoral register, closing old accounts, checking for any errors on your report, and paying all your bills on time. You may also consider increasing the length of the loan or borrowing less.
- Can I take out a loan if I already have one?
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Yes, you can. When you apply for a new personal loan, lenders will look at your existing borrowing to see if you can afford the second loan. Many people choose to take out a new loan to consolidate existing borrowing – whether loans or credit cards – into one loan with a single monthly repayment.
Please remember that by consolidating existing borrowing, you may be extending the term of the debt and increasing the total amount you repay.
About our trusted provider, Aro
Asda is in partnership with Aro which is a trading name of Aro Finance Limited. Both Asda Money and Aro are credit brokers, not lenders. We offer our customers a different solution to borrowing money and finding a loan.
We work alongside Aro so we can provide our customers with their very best loan offer from a panel of handpicked trusted lenders.
With one simple eligibility check, our panel of lenders can provide you with a loan tailored to your needs. It’s also a safe way to find a loan without negatively affecting your credit rating.
Other Links
ASDA Money is a trading name of Asda Financial Services Ltd who are an Introducer Appointed Representative of Aro which is a trading name of Aro Finance Limited (company number 06297533) of Atlantic House, Atlas Business Park, Simonsway, Manchester, M22 5PR. Aro acts as a credit broker and not as a lender and is authorised and regulated by the Financial Conduct Authority (FRN 662079).
Terms and conditions apply. UK residents aged 18 and over. If you take out a loan, Asda Money and Aro receive a commission payment from the lender. Different amounts of commission are received from different lenders and the amount will be either a fixed amount or a percentage of the amount you borrow and dependent on the lender you select. We will not charge you a fee for our services.