Credit Capital

Can I get finance for a used car?

used car finance

Many people believe car finance is only available for new cars, however, this is not the case. There are certainly many banks and finance companies in the market that will strictly only provide car finance for new cars, this is not true for all lenders though. It is important to understand that just because one lender says something can’t be done, doesn’t mean that this is true for all lenders. 


There is a huge variety of lenders in the market, all with their own niches and sweet spots when it comes to lending. All their rates vary on a rate for risk basis, and their risk is calculated using their own data from their own loan books regarding which demographics perform the best and which demographics they’re most likely to encounter losses upon. As a result, each lender varies their own rates and lending criteria over time as well. This means that the lender that has the best deal for you at one point, isn’t necessarily going to be the lender that has the best deal for you in the future. This is the trap that many people fall into and where confusion in the market starts to occur. Just because your own bank had the best deal for you at one point, many people believe that they will always have the best deal and don’t take the time to shop around or compare. If you financed a new car through your bank previously, then you ask them about used car finance and they say it can’t be done, a lot of people stop the process there and take what their bank says as gospel. 


The best way to get up to date, and accurate information regarding what can or can’t be done, or which lender has the best deal for you, is by talking to a broker. An experienced, and independent broker can give obligation free and unbiased advice regarding what your financial options are. They have access to a broad portfolio of lenders, so can access the best deal and tailor any package to meet all individual requirements. 

Should I get finance for a used car?

This is a question that often comes up, however the answer varies for all individual circumstances. There are many benefits to financing a used car, and some downsides as well which must be considered.


Many people believe used car finance is very expensive, with interest rates being significantly higher than new cars. For some lenders this is true, however it is not the case for all lenders. Many banks will only provide car loans for new cars, and if you’re looking to attain finance for a used car they will offer you an unsecured personal loan. Personal loans have much higher interest rates than car loans as there is no collateral for the lender to repossess if you default on the loan. In this circumstance it would be true that used car finance is very expensive, however, the issue here is not going to the right lender, not the used car financing itself. Used car finance usually does have slightly higher interest rates than new cars, but only marginally. The money you will save on purchasing a used car vs a new car will more than offset the marginally higher interest rate that would be payable. 


If you are on a budget, many people believe it is lower risk to save up and purchase a used car with cash rather than taking out finance for a used car. Saving up and buying a used car with cash, especially if you’re on a budget, does have its downsides however. If you’re on a budget, the type of car you could afford to buy with cash is very likely going to be of a lesser quality than what you could buy if you were to finance. Buying a cheap car exposes you to a much higher risk of your car breaking down and attaining unexpected maintenance costs. On the other hand, if you finance a used car, you can buy something much less likely to break down, and even include a warranty within the finance, therefore making it much easier to budget your expenses each month. You know how much your fixed loan repayment will be each month, and it is extremely unlikely the running costs for the car will ever exceed that amount beyond your standard fuel and servicing requirements. 


Some people believe it is a waste of money to finance a depreciating asset as they are paying interest on something that is decreasing in value. If you have the money in your bank to buy the car you want now, instead of just focusing on how much interest you will be paying over the loan term, a smart investor will be comparing the interest expense with the potential gains attained if they were to invest the money instead. If you’re looking at buying a car for 20K, and you’re deciding between buying the car with cash and financing, if you were to invest the 20K for 5 years and finance the car over a 5 year term, the average investment will increase in value greater than the amount of interest paid over the loan term. At the end of the loan term you will have your car fully paid off, plus your initial 20K investment plus all capital gains attained over the loan term. 


There are many things to consider when looking to get finance for a used car. The best way to get accurate and unbiased advice for your own individual situation is by talking to a professional finance broker. A dedicated broker understands the market, knows where you can get the best deal, and assist you with the number crunching to help you determine which used car finance option will be best for you.