How to Calculate Finance on a Second Hand Car

In reality, most people can’t since second-hand cars are still quite expensive. Despite being much more affordable than brand new models, you’re still looking at a total of several thousand pounds, which exceeds most people’s rainy-day fund. Thankfully, second-hand car finance makes it more affordable to buy a used car and make a substantial purchase less substantial.

Still, you need to know how much the deal will cost before you sign on the dotted line. Otherwise, the agreement might not be suitable. With that in mind, here’s how to calculate finance on a used vehicle.

Can you get finance on a second-hand car?

There’s a perception that second-hand car finance isn’t available because of the cost of used cars. According to Money Saving Expert, new motors depreciate at a rate of 27% in the first 12 months, meaning vehicles that are only twelve months old are much cheaper than their counterparts.

Yet, 27% might mean that the value is still above £15,000 or £20,000, which means you’re going to need help from a lender. Turning to car finance is essential as the deals are designed for drivers’ needs. It’s worth remembering that private sellers won’t offer the service as they simply want to offload the vehicle and make a small profit.

Of course, you’re not guaranteed to be accepted just because you applied. There are factors that determine the outcome, so let’s take a look at a few:

Credit rating

Your credit rating, or credit score, is the first thing lenders will look at before signing you off. If it’s not high enough, you might need to take certain measures to boost it, such as paying bills more punctually or avoiding hard checks. Another option is to use your credit card more regularly because you might be rejected if you don’t have any evidence of your spending habits.

The length of the deal

A longer agreement will play into your hands. Typically, car finance deals can range from anywhere between three to seven years, with six being the average. While you will pay extra the longer it lasts, the monthly payments are smaller because they are stretched over 72 months instead of 36 months.

Size of your downpayment

You can lower your finance premiums by putting down a bigger downpayment. The deposit reduces the risk for lenders and therefore can lower the rate you pay. After all, they already have a portion of the loan back, depending on the size of your deposit. However, it’s worth mentioning that you don’t need to pay a deposit to take out car finance.

At My Car Credit, we know how important it is for our customers to be accepted. That’s why we analyse a range of factors before deciding, and why we’re always happy to offer help and advice to any applicants.

How to calculate second-hand car finance

We understand that numbers can confuse people, which is why lots of motorists decide to avoid second-hand car finance in the first place. It can seem too complicated, so they steer clear of what they don’t understand.

That’s a healthy strategy. However, you don’t have to fall into this category because working out the cost of car finance is simple. You only have to do the following:

• Take the cost of the car
• Divide it by the number of months in the agreement
• Add in the rate of interest

Once you have done that, you can clearly see how much you will pay overall and at different periods throughout the deal. For example, you can see the monthly fees, and use them to calculate your overall incomings and outgoings. As a result, you will know whether a second-hand car is affordable in a matter of minutes!

My Car Credit’s car finance calculator

To make matters even easier, at My Car Credit, we have developed a car HP calculator that takes all the stress and confusion out of the process. Whether you want to know how much your monthly payments will be or how much car finance you qualify for, our online tool does the maths on your next car for you in seconds. Just type the relevant details into the easy-to-use interface and let the calculator do the rest.

If you want to learn more about how My Car Credit can help you land the second-hand car finance deal of your dreams, please don’t hesitate to contact us right away.