Buying a Used Car – Which Finance Option is Best for Me? 

The cost of buying a car, even a used one, can sometimes be enough to make you settle for taking the bus. However, Car Buyer notes that nowadays purchasing a car on finance is a lot more common and there are many options available to do so, making buying more feasible. The financing options available to you depend on the dealer, for example, dealerships can generally provide more financing options than private sellers. Financing options also depend on your credit score as many options require a high credit score and a relatively long credit history to be accepted, meaning young drivers may be restricted according to Experian. Similarly, the type of financing option which suits you best depends on how much you can afford to repay each month including interest, how long you want to be making repayments, and whether you want to own the car at the end of financing. The main types of financing options include: 


Personal Loan 

Money Saving Expert details the costs and benefits of taking out a personal loan to finance a used car. A personal loan should cover the outright cost of buying the car, then the loan is paid back in instalments over a pre-arranged period. These loans are unsecured meaning there is less risk for you as you don’t need to provide a form of collateral in case you can’t pay the loan back however, this means that there is more risk for the loan supplier meaning you may need a higher credit score for this financing option. 


Hire Purchase 

With a hire purchase, you do not initially own the car and it generally involves paying a lump sum followed by monthly payments made towards the cost of the car. At the end of the payments, there is an option to pay a purchase fee which will allow you to own the car if you choose to pay it. However, if you fail to make the monthly payments, the company may take the car back to recover their losses and end the hire purchase agreement early, which may result in a penalty. 


0% Finance 

0% finance involves paying a deposit followed by monthly instalments to finance the car. However, Experian notes that the deposit and the monthly instalments are generally relatively high however no interest is paid on the debt as long as the terms of the agreement are honoured, and all payments are made on time and in full. 



Leasing a used car involves making regular, often monthly, payments to finance the car however you do not own it during this time. The amount that you pay is dependent on the length of time the car is used, its value and the agreed mileage allowance. When leasing a used car you will likely need to take out fully comprehensive car insurance to cover any damage to the car and some companies may require you to have gap insurance which provides them with increased protection against damage or theft.  


Personal Contract Purchase 

A Personal Contract Purchase or a PCP loan is one of the most common ways to finance a used car, they are flexible and generally have low monthly payments, however, the interest rates can be quite high, there can be penalty charges and you typically need a good credit history to be accepted. A non-refundable deposit is paid towards the car’s price and the rest is borrowed, monthly payments are then made to cover the interest and cost of depreciation. At the end of the contract, you have the choice to either trade the car in for a replacement with a new PCP contract, return the car, or buy the car outright. 


0%  Purchase Credit Card 

This type of financing requires a good credit score but is flexible as it allows you to choose how much you pay off per month and you aren’t required to pay interest for a set period. However, you must ensure that you pay the minimum monthly repayments in full and on time.