Can I get a used car on finance?

There are two main ways in which you can get a used car on finance - hire purchase and personal contract purchase. Both of these consist of an initial deposit and monthly payment plan, with the option to own the car once you have completed this plan.

Hire Purchase

When purchasing a used car using Hire Purchase finance, you will have to pay a deposit, followed by a plan of monthly payments over a set period of time. Once you have completed this payment plan, you will own the car outright. You can then choose to keep it or to sell it on.

Your monthly payments will depend on many factors, including the price of the car, the size of your deposit, and the length of the payment plan. You can use this to your favour as it allows you to adjust the car finance deal to best suit your financial position. For example, if you have the cash to pay a large initial deposit then your monthly payments will be reduced, but if you would prefer to pay larger monthly payments and a smaller deposit then this is also an option.

It is important to note that the car will only be legally yours once you have completed your monthly payment plan. This means that you will not be able to sell the car until then, unless you get permission from the dealer.

Personal Contract Purchase

As with Hire Purchase finance, a Personal Contract Purchase (PCP) plan requires an initial deposit followed by a series of monthly payments. The difference is that, once you have completed these monthly payments, you will have to return the car to the dealer. If you would like the purchase the car outright, you will have to pay an optional final fee at the end of your payment plan.

Because you won’t necessarily own the car once you have completed your monthly payments, a PCP plan will cost less than a Hire Purchase plan on the same car. The initial deposit and the monthly payments will be calculated based on the price of the car, and the amount the dealer expects to sell the car for once you have returned it. You may incur extra charges when you return the car at the end of your payment plan, either due to damage or from exceeding the mileage cap that will be part of your agreement.

Although lease agreements are usually limited to new cars, some dealers offer leases on used cars, with similar terms to that of a new car. A lease agreement takes the form of a contract outlining how much you will pay per month and for how long. The lease agreement will also include a mileage limit and a guarantee that you will return the car in good condition at the end of your lease, as with a PCP plan.

Your monthly payments will be dependent on how much the dealer expects the used car to depreciate, or lose value, over the course of your lease agreement. The depreciation of a used car is harder to predict than a new car, therefore dealers tend to offer more expensive leasing deals than expected on used cars to make sure that they do not lose money if the car suddenly depreciates in value.

If none of the finance deals offered by the car dealer suit you, or the dealer does not offer finance deals on used cars, a personal loan may be a good alternative. In this case your monthly payment plan will be set by the bank. Getting a used car through a bank loan is good if you do not have the money to pay a large deposit; it also allows you to sell the car at any point, as long as you keep repaying the loan.