How to Finance Second Hand Car in the UK

Most people in the UK buy second hand cars. In this article, we look at the best strategies to finance second hand car in the UK, How to find good car loans in the UK and hire purchase in the UK.

Are you considering buying a car in the UK? A common approach is where you pay a brand-new car from a dealer. If you are buying an average car, this will cost yoabout £28k. Another option you have is to buy a second-hand car in the UK. According to studies, an average second-hand car in the UK costs about £28,700.

Why Buy a Second-Hand Car in the UK?

Is it a good idea to buy a second hand car? This is a common question. The honest answer is that it depends. There are some people who believe in buying used cars and those who believe in buying just brand-new cars. Here are some of the most common reasons you may consider buying a used car.

  • Brand new cars are less expensive. The average price of a used car is always less than that of a new one.
  • No difference. In some cases, a used car does not have significant difference with a new car.
  • Depreciation. The value of a car starts depreciating the moment you purchase it. Therefore, when you buy a used car, most of the depreciation has already happened.
  • Certified option. A common reason why people opt for new cars is certification. These days however, many car manufacturers offer a certified pre-owned option.
  • Variety. Hundreds of car models are released every year. At times, the only way to find a car model you love is to go in the used car market.
  • Lower insurance cost. The insurance cost of a car depends on its value. A second hand car will have lower insurance premiums than a brand new one.

Using a Personal Loan

The best option for financing a car is to use your savings. This is because with savings, you will own the car right away and you won’t owe anyone money. You will also not need to pay any instalments. However, most people in the UK don’t have the funds to pay for a car. In this regard, another option is to get a personal loan from a bank.

A car bank loan is money that a bank extends to you to buy a car. In most cases, the bank will assess your creditworthiness. The bank will then establish the value of the car, and extend the loan to you. The bank will then keep the car registration papers to ensure that you pay back the money. In case of an accident, the bank will deal with an insurance company to recoup its funds.

A bank like HSBC can lend you between £1,000 and £25,000 and spread the payments between 1 to 8 years. The bank charges a fixed annual interest rate of 3.3%. Therefore, if you borrow £10,000 for a period of 3 years, your total payment will be just £10,509. A good way to find a good rate is to shop around. This means that you should shop around. The best way is to use various online tools that compare these loans. Some of the best platforms are Money Supermarket, Compare the Market, and GoCompare among others.

Advantages of Auto Personal Loans

  • Low interest rate.
  • Flexible payment options.
  • Competitive interest rates.
  • Low deposit amount.
  • With a loan, you can easily buy a car if you don’t have the money.

Cons of Auto Loans in the UK

  • A loan will always be expensive than paying with cash.
  • You can wait for a while before it is approved.

Hire Purchase

Hire purchase is another option that is similar to a personal loan. You simply visit a used car dealer, view the car and agree on the price. After this, you pay a deposit of the car. The deposit is usually about 10% of the value of the car. The dealer will then give you the car and the terms and conditions. After this, you will start paying monthly to the dealer. Many used car dealers in the UK offer hire purchase options. You should do your research about the best companies that offer the services. Other companies have online tools that allow you to calculate the financing costs. Your credit score will determine the amount of premiums you pay.

Pros of Hire Purchase

  • Hire purchase is a cheap option to own a car.
  • It is easy to arrange financing.
  • You can shop around for competitive rates.

Cons of Hire Purchase

  • You don’t own the car until you pay it in full.
  • Your credit score influences your monthly premiums.

Personal Contract Purchase (PCP)

A personal contract purchase is another option you have to finance a second hand car in the UK. The service is similar to a hire purchase, only that the value of the car is affected. As we wrote above, in a hire purchase, the bank looks at the total value of the car. On the other hand, a PCP looks at the value of a car during the term of the loan.

The process works like this. You go to a used car motor dealer and find a car. You agree with the dealer the amount of money you want to borrow minus any deposit payment and the value of the car. The dealer then submits your details to a financier, who checks your credit score and then pays the funds on your behalf. At the end of the contract, you will either pay back the car’s guaranteed future value in full and own the car or give the car back to the dealer. Alternatively, you can trade in the car by using any equity of the car.

Pros of Personal Contracts Purchase

  • Low monthly payments than hire purchase.
  • Low initial deposit.
  • Flexibility of what you want to do with the car.
  • Fixed monthly payments.

Cons of PCP

  • The process can be expensive than hire purchase.
  • The calculation of the guaranteed minimum future value (GMFV) can be vague.
  • Possible additional costs if you pass the mileage.


The best and cheapest option of buying a used car in the UK is to pay it in cash. However, not many people can comfortably afford this amount of money. Therefore, if you want to pay for the car, you can use the options we have discussed in this article. The secret is to research on these options and shop around to find the most cost-effective option.

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