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Car finance is the preferred funding option for most new car buyers in the UK. For many car buyers purchasing outright with cash isn’t a realistic option.

Is Car Finance Just for New Vehicles?

UK Car Finance
19, Nov 2019

When you are able to purchase upfront, car finance still has various benefits to consider.

Contrary to popular belief car finance isn’t just available for new vehicles. Nor is it only available for specific types of vehicles or vehicles of a certain value. Car finance is flexible and can be used to purchase any type of vehicle.

Just as with new car purchases, the popularity of car finance for buying used cars is at a record-high in the UK.

Why Finance a Used Vehicle?

The appeal of owning a brand new car that has never been driven is obvious.  From a financial perspective, however, buying a used vehicle is almost always the more cost-effective option.

This is particularly true where car finance is concerned. One of the biggest issues when buying a new car is the inevitable depreciation of its value. With some new cars, up to 40% of its original value (purchase price) is wiped out within the first year. Some new cars lose as much as 20% of their value the moment they are driven off the forecourt.

Most car finance contracts extend for 2 to 5 years. This means that by the time the contract for a new vehicle comes to an end it will have lost some of its value. How much value depends on the make and model of the vehicle, how well it has been looked after and the vehicle mileage. 

It’s also worth remembering that until your vehicle finance contract comes to an end, you won’t be the official owner of the vehicle. By which time it could be worth considerably less than when you collected the keys.

Though not always the case, used cars tend to lose considerably less value over time. As their ‘new car’ value will have already depreciated the subsequent depreciation isn’t nearly as rapid or severe. Factors like the vehicle’s age, condition and mileage continue to play a role but don’t tend to have quite the same impact.

Finance a Used Car with Bad Credit

Another advantage to financing a used vehicle is the lower overall purchase price. If your budget won’t stretch to a £15,000 for a new car, you might find a £5,000 more within your budget. Bad credit borrowers could also find used cars more accessible, as qualifying for a larger loan with a poor credit history can be difficult.

Terms, conditions and clauses vary significantly from one lender to the next.  Poor credit loans in particular can be difficult to come by on the High Street, though are readily available online by car finance companies.

In a Nutshell…

Financing a new car and being its first and only driver is an appealing prospect. There are, however, several big advantages to financing used cars at a lower price. Consider your preferences and your budget before consulting with a broker to discuss the available options.

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