Compare Used Car Finance

What Is Used Car Finance?

Used car finance helps you pay for a used car over time instead of all at once. UK residents can borrow a loan amount from a lender and then pay it back in monthly payments. There are several financing options with competitive interest rates. You can get these through brokers or car dealerships.

Used vehicles usually cost less than new cars. Used car finance lets more people be able to buy these cars. You can get a used car from a dealership or look at private sales. There are different loan options for every budget or need.

How Does Used Car Finance Work?

Used car finance is a lot like standard car loans. After the loan application is approved, the lender sends money right to the dealership or seller for you. You pay the money back to the lender in monthly payments that stay the same every month. The terms can change by your credit score, your credit history, how long your loan term is, and the cost of borrowing for a used car.

Here's a simplified example:

Vehicle Price	Deposit	Loan Amount	Loan Term	Interest Rate (APR)	Monthly Payments	Total Cost of Borrowing
£10,000	£1,000	£9,000	48 months	9.9%	£226.63	£10,872.24

This covers all the extra costs that you have to pay during the life of the loan.

What Financing Options Are Available for Used Cars?

Hire Purchase (HP)

You pay a deposit first, then you have to pay the balance of your loan in fixed monthly payments.
After you finish your last payment, you take ownership of the vehicle.
A full credit check will be needed.

Personal Contract Purchase (PCP)

You can have lower monthly payments, but to keep the car at the end, you must make one big payment.
This is good if you want to change what you drive every so often.
If you do not pay the last big payment, the car will be given back.

Personal Car Loan

A general-purpose loan is used for the purchase of a car.
The loan has a fixed interest rate and fixed term.
The vehicle will be yours from the start.

Bad Credit Car Loans

There are special financing rates for people who have poor credit history.
These usually come with higher interest rates.
You may need to give proof of income and show you can afford it.

What Financing Options Are Available for Used Cars

Who Can Apply for Used Car Finance?

To apply, most lenders require:

You need to live in the UK.
You should show proof of income, like payslips or bank statements.
You need to have a valid UK driving licence.
You must be 18 or older.
A credit check is needed. This can be a soft or hard check, depending on what the lender wants.

Your credit report plays a big role in your interest rate and the loan options you can get. If you have a good credit score, you will often get more interest rate choices. People with better credit reports usually get more competitive financing options. This can help them find the best financing options for them.

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Can I Get Used Car Finance With Bad Credit?

Yes, there are many UK lenders that give you loan options even if your credit score is low or you have missed some payments in the past. You may not get the lowest APR, but you can still look at car finance deals that fit your budget and needs.

Some brokers focus on giving used car loans to people with bad credit. They look more at your current financial situation than only your credit history. You might have to show extra proof of income too.

What Are the Benefits of Used Car Finance?

The monthly payments will be lower than if you buy the car right away.
You can pay the cost over time, for up to 60 months.
A fixed interest rate lets you know your monthly payments will not change.
You may get a better car that you could not buy up front.
The loan terms are flexible, so you can pick what works with your income.

What Costs Should You Expect With Used Car Loans?

When you figure out your payment amount, you need to add in all charges.

Cost Item	Description
Deposit	May be required (0% to 20%)
Interest (APR)	Annual percentage rate varies with credit score
Admin Fees	Some lenders charge setup or processing fees
Late Payment Fees	Penalties for missing payments
Final Balloon Payment	PCP only (if you want to own the car at the end)
Additional Fees	Check terms for early settlement or over-mileage charges

Use a car loan calculator to find out what the real cost of borrowing will be. This tool helps you see how much you have to pay over time for your car loan. It can help you know if you can afford the car, and what the cost of borrowing really is. A car loan calculator is a good way to plan before you buy.

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Car finance with negative equity also tends to come with higher interest rates due to the increased risk for the lenders.

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What Is the Typical Interest Rate on a Used Car Loan?

Interest rates for used car loans can be different. They depend on your credit score, who is lending you the money, and how long the loan term is. In 2025, you may see changes based on these things.

Credit Score Band	Typical APR Range
Excellent (800+)	6.5% – 8.5%
Good (700–799)	8.5% – 10.5%
Fair (600–699)	10.5% – 15.9%
Bad (Below 600)	16.9% – 29.9%+

These interest rates are examples, and the real rates can change based on the lender. A fixed interest rate is common. But look out for any special financing rates or promotional financing rates that may end after some time.

How Much Can I Borrow for a Used Car?

Most UK lenders give personal car loans from £3,000 up to £25,000 if you want to buy a used car. The loan amount that you can get will depend on:

Credit score
Income and affordability
Deposit available
Vehicle age and mileage

High-value used cars can need a bigger deposit. They might also come with a shorter loan term.

What Loan Term Should I Choose?

Loan terms are usually from 12 to 60 months. If you choose a longer loan term, your monthly payments will be lower. But, you will pay more in the amount of interest over time.

Loan Term	Example APR	Monthly Payment	Total Repayable
24 months	7.9%	£450	£10,800
48 months	9.9%	£250	£12,000
60 months	12.9%	£200	£12,800

Use a car loan calculator to help you find the right balance between how long you take to pay off your car loan and how much you pay overall. This can help you see which way is good for you. A car loan calculator lets you quickly try out different options and see what works best for you.

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Are There Any Risks to Consider?

You may have to pay higher interest rates if you have bad credit.
The value of your vehicle can go down. This can make you owe more money on it than what it is worth.
If you make late payments, it will show up on your credit report.
When the lease ends (PCP), you need to plan your budget well.
You might be stuck in a set agreement for several years.

Do I Need a Deposit?

Many brokers give used car finance deals where you do not have to pay a deposit. But, if you pay a deposit, it can:

Lower your monthly payments
Reduce the cost of borrowing
Improve your approval chances if you have poor credit

What About Part-Exchange or Trade-In?

If you already have a car, many used car dealerships let you part-exchange it. The value of your used car will go towards the purchase of a car on finance at these car dealerships. This will lower the loan amount you need to borrow. It can also help to bring down your payment amount.

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When searching for the best pay monthly car offers, it's essential to consider factors such as the annual percentage rate (APR), deposit contribution, and the length of the finance agreement.

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Can I Get Special Financing Rates for Used Cars?

Yes, some dealers and lenders have special deals at certain times of the year. They sometimes also give loyalty bonuses and lower annual percentage rates. But, most of these offers are for people with good credit. You should always check if the offer stays the same for the whole life of the loan or if it is just a short promotional deal.

What Documents Do I Need?

To complete a loan application, you’ll need:

You need to show proof of identity, like a passport or driving licence.
You will be asked for proof of income. This can be payslips or bank statements.
For proof of address, use a utility bill or a bank statement.
You should also give details about your current financial situation.

Compare Car Finance Options Easily

Free Price Compare lets you:

See used car finance offers from many lenders.
Filter deals by how much to pay each month, the loan term, and the deposit needed.
Check soft search quotes that will not have an impact on your credit.
Compare used car finance, new car loans, and bad credit deals.
Reuse quotes to look at car insurance deals across providers.

You can also look at car insurance when you look at your loan. This way, you can be sure you will stay within your budget.

FAQs About Used Car Finance

Your first payment is usually due 30 days after you sign the agreement. But, this time can change.

Yes, many lenders let you pay off your loan early, but some may ask you to pay a fee for it. Look at the contract to find out about the early settlement terms.

If you miss payments, it can hurt your credit history. You could also lose your car. If you find it hard to pay, talk to your lender at once.

Most used car finance deals happen at the dealership, but some places let you buy a used car from a private seller. For this, you will need to have some extra papers ready.

Used car finance lets you own the car in the end. Leasing is a way to rent for a long time, but you do not have ownership. You only get to own it if you choose a lease-purchase agreement.

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Correct as of 31 July 2025

Compare Used Car Finance

What Is Used Car Finance?

How Does Used Car Finance Work?