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Can You Pay Monthly for a Used Car?

Opting for monthly payments is one of the smartest decisions you can make when purchasing a used car. Many Brits think payment plans are just for new vehicles and as a result, don’t ask “can you pay monthly for a used car?” when shopping for a second-hand ride. This is a big faux pas as car finance offers some fantastic benefits; when done right.

Want to know more? Read on as we answer all your questions about can you pay monthly for a used car.

Scenarios where used car finance steps up

Below, we explore some scenarios where used car finance can step up as a great purchasing option:

You want to stretch your budget

With the latest research from Auto Trader revealing the average cost of purchasing a used car in the UK is whopping £18,000, even second-hand vehicles are out of reach for many Brits. If you think this sounds high, you’re probably not alone. Over the past year, the typical cost of a pre-owned vehicle has increased by around £4,000. Large, family-friendly models are the most coveted, though the drastic price increase of almost 32% has hit all vehicle types.

If you’ve got a healthy deposit but can’t afford to pay the full amount in cash, car finance can help stretch your budget. It’s not about biting off more than you can chew and splurging on a vehicle you can’t afford. Instead, car finance can be a clever alternative to get behind the wheel of a used car within your budget, only faster.

Crunching the numbers is important, so take the time to factor in variables such as your budget, cash deposit, preferred loan term and your credit score, which can affect the interest rates you’re eligible for. Our cost of car finance calculator is a great place to start.

You want to boost your credit score

Committing to monthly payment plans, such as a car finance loan, can be a great way to boost your credit score. If a big financial move like applying for a mortgage or increasing your credit card limit is on the horizon, car finance can be a great way to improve your reputation as a borrower and prove to lenders that you’re a responsible applicant.

You want to be a competitive buyer

Factors like the global semiconductor chip storage, supply chain issues caused by the pandemic and conflict between Russia and Ukraine have hit the used car market hard. According to Richard Walker from Auto Trader, “the speed in which used cars are selling has also accelerated significantly, with the average car taking 11 days fewer to leave forecourts in February 2022 when compared to the same period last year.”

Demand for used cars is high which means you’ll likely face competition from other buyers. Car finance can help you make a realistic offer on a used car and give dealers the peace of mind that payment is guaranteed.

Understanding loan types for used cars

As a used car buyer, you enjoy the same auto loan options available with new models. These include:

Personal contract purchase (PCP)

PCP loans are one of the most popular ways to pay for used cars. Offered by car dealerships and independent lenders, they allow you to spread out payments for your vehicle over three to five years. You may need to make a cash deposit but options are available without.

Payments are calculated using the price of the car, the interest rate (APR) of your loan and most importantly, the expected depreciation rate of the vehicle. Your lender will calculate a guaranteed minimum future value (GMFV) and at the end of the loan, you’ll have the option to make a ‘balloon payment’ equal to the GMFV to keep the car. Alternatively, you can use the GMFV to fund a new PCP agreement.

Personal contract hire (PCH)

PCH loans are another great way to get into the driver’s seat of a used car faster. Also known as car leasing, you pay a cash deposit, then continue to make monthly payments for the duration of the lease term. Most agreements span for between two and five years, with longer terms translating to lower monthly instalments. At the end of the contract, you’ll give the car back to the dealer.

Hire purchase (HP)

As the name suggests, HP loans see you ‘hire’ a vehicle for a fixed period, usually between one to five years. You may need to make a cash deposit, but no-deposit options are available, then continue to make monthly instalments over the course of the loan. At the end of a HP plan you’ll have the option to take ownership of the car by paying a transfer fee.

Personal loan

If you want to own your car outright, a personal loan can be a good way to boost your budget. A lender will agree to a fixed sum, which you’ll use to purchase a used car. You’ll then repay the loan in monthly instalments, usually spread out over a year or more. Generally, the higher your personal loan, the lower your APR will be.

Can you pay monthly for a used car?

The final verdict on whether you can pay monthly for a used car? Absolutely. Auto finance can be a terrific way to pay for a used car, with different benefits appealing to different buyers.

Ready to get behind the wheel of your dream used car? Whatever your budget or credit rating, we’re here to help. With access to one of the biggest panels of lenders in the UK, we have the connections to secure you the best possible deals on finance for used vehicles.

You can calculate car finance and apply without impacting your credit score. Alternatively, get in touch by email or give us a call on 01246 458 810 to find out more about how can you pay monthly for a used car.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

Car Finance Repayment Terms: What’s Best for Me?

At My Car Credit, we understand how confusing car finance repayments can be. You might have found the perfect next set of wheels. However, you may also find yourself getting lost in a sea of paperwork and admin. Even worse, you may be getting tripped up over hidden costs and surprise terms and conditions.

But don’t panic – this article is designed to clear that confusion! What’s more, we’ll lay out what you can expect from different car finance repayment options, as well as the potential benefits and pitfalls of each. That way, you go into your search knowing what meets your requirements and how much you can afford. This means you can find a deal that suits you without wasting too much time or energy.

Don’t forget too, that once you’ve decided what kind of terms best match your needs, you can use our online car payment calculator to get a super speedy, straightforward quote from us.

Car finance repayments – what’s right for me?

First things first, and before you begin looking at repayment terms, it’s important to establish how much car finance you’d qualify for. Once you’ve worked this out, you’ll have a better idea of what to look out for when applying for car finance. This will allow you to tailor your search accordingly. We’ve also outlined what factors affect the cost of car finance too, in case you’re confused about that.

Repayment terms – what’s the difference?

Your car finance repayments will have a significant impact on what type of finance scheme best suits you. Below, we lay out the pros and cons of different repayment terms.

Short term loans

Typically, a short loan repayment term will tend to be between 18 to 24 months. Shorter repayment terms mean that you pay higher monthly repayments as you have less time to spread the cost. However, you’ll also pay less interest overall because you’re repaying your loan much quicker, slashing the amount of borrowing time.

The vehicle will also have a higher resale value once it’s been paid off. This is because a newer car is more attractive for re-sale than an older model, which is another factor to keep in mind.

Short repayment terms are great if you have a large monthly income and are financially stable. The upside is that you spread the car cost, slash interest, and can use your hard-earned cash on something else. Just be aware that you’ll likely be asked to prove that you have the income to fund a short-term loan. In the main, payslips and bank statements are the most obvious way to back this up.

Pros/Cons:

+ You pay off your owed balance quicker

+ Less interest payment overall

+ The vehicle will have a higher resale value once paid off

– You’re paying higher monthly repayments

– A potentially higher upfront payment

Long Term Loans

Long term repayments are the more traditional car finance package offered. You’ll usually spread the cost of your car over 48 or 60 months – 4 or 5 years in other words. This ensures that the repayments are more manageable than you’ll find in a short-term loan. What’s more, you may even be able to purchase a more expensive car, as you’re paying less upfront.

However, you’ll also end up owing money for a longer period of time. Plus, you’ll be paying interest for longer, which means the overall cost will be higher. This is because the amount you’re charged is based on the interest rate established at the start of the agreement, so you’re paying more to the provider with less value return on the vehicle.

Equally, a longer repayment period means that the value of your car will depreciate more. This is something to consider if you’re looking to sell or return the car at the end of the repayment term.

Pros/Cons:

+ Monthly repayments are more affordable

+ You might be able to purchase a more expensive car

– Lower resale value on the vehicle

– Interest payments are significantly higher

What’s the best option for car finance repayments?

It’s really important to go into your search for car finance knowing what you can afford. In addition, try to establish what suits your particular requirements – there isn’t a one-size-fits-all approach. If you don’t think you can front the monthly payments of a short-term repayment scheme, the long-term option is best for you. Equally, if you’re keen to trade in for a new vehicle after only a couple of years, the short-term option will be most appealing.

Using our car finance repayment calculator will help you to get a better idea of the best option for you. We design our car finance to be as flexible and user-friendly as possible. What’s more, we’ll give you a quote within minutes. We’ll only ask you for a few details, and our soft search check won’t affect your credit rating.

Talk to one of our friendly team today, and start your search for the best car finance for you.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

What Checks Are Done for Car Finance?

Try Our Classic Car Financing Calculator

What is the Average Car Loan Interest Rate?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance calculator Jan24 monthly cost repayments

4 Factors That Impact the Cost of Car Finance

Car finance is a great way to spread the cost of a new car. What’s more, it allows you to get a better vehicle and potentially save money on repairs and replacements in the long run. However, the cost of car finance itself can vary quite a bit. This depends on a number of factors, which we’ll discuss in this post.

1. Cost of the car

The most obvious factor that affects the cost of car finance is the value of the car you’re looking to buy. Car finance is essentially a loan that you take out to pay the dealership or seller. The higher the value of the car, the more money you’ll need to borrow. This will make the monthly repayments higher as well as adding to the interest you’ll need to pay. So, to minimise the cost, more affordable cars are better.

2. Credit score

Next on the list is your credit score. There are of course plenty of lenders which will provide car loans for poor credit. However, the score itself may affect the rate of interest which lenders will offer you.

Customers with good credit scores are seen as a safe bet, meaning lenders will be able to give them the lower interest rates. On the other hand, those with bad or poor credit scores are a bit more of a risk for lenders. As a result, they may need to pay a higher interest rate to balance out the risk to the lender.

3. Length of repayment

Much like a standard loan, car finance can be taken out over a variety of repayment terms. Given that cars are quite a large purchase, 24 months is typically the minimum term for car finance. Alternatively, you might want to spread the cost over a longer period such as 36 months (3 years), 48 months (4 years) or even 60 months (5 years).

Paying back your car finance over a shorter term like 24 months will make the monthly cost of car finance higher. This is the result of the cost being spread over fewer instalments. However, it will generally reduce the overall cost of car finance because you will be paying the money back sooner, incurring fewer interest charges.

4. Car finance provider

This brings us to another consideration – the provider you choose. Interest rates are one of the biggest factors when it comes to the cost of your car finance. Put simply, this is the cost added on to your loan over time as a charge for lending you the money.

Interest rates vary depending on which provider you choose, which is why it’s important to do your research before applying for car finance.

Car finance for poor credit

If you want to find a good deal on poor credit car finance, don’t hesitate to get in touch with My Car Credit. We use a large panel of trusted UK lenders to find a fair deal for all applicants. This allows you to minimise the overall cost for your new car and spread it across a repayment term that suits you.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

What Checks Are Done for Car Finance?

Try Our Classic Car Financing Calculator

What is the Average Car Loan Interest Rate?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

cost Jan24 monthly cost

Can You Pay Monthly for a Used Car?