A used car is bought on the same three agreements as a new one: hire purchase, personal contract purchase, or a personal loan. What changes is around them. The term a funder will write is shorter, the rate is usually higher, the deal is far more often with an independent dealer than a franchise, and the question of who fixes it if it goes wrong has a different answer depending on how you paid.
Used cars to finance are priced on what the funder could resell
Every funder is lending against the car, so a common model with a full service history and ordinary mileage is the easiest thing to finance and the cheapest. An unusual specification, a very high mileage or a car close to the funder's age limit all raise the deposit asked for, shorten the term or raise the rate. That is why the same buyer gets different answers on two cars at the same price.
Hire purchase used cars and the ownership you end with
Hire purchase clears the whole balance over the term and the car is yours when the last payment goes through, which suits a used car you intend to keep. A personal contract purchase on a used car works too, with an optional final payment based on a forecast value, but the forecast on an already-depreciated car leaves less room and the monthly saving is smaller than it is on a new one.
Used car dealer financing is a commission arrangement, and it can still be the best offer
A dealer offering finance is introducing you to a lender and is usually paid for it, which is not a reason to refuse it: dealer-placed motor finance is often cheaper than a personal loan because it is secured on the car. It is a reason to get one comparison quote of your own before signing, and to check the firm on the Financial Services Register.
Financing for a used car changes who is liable if it is faulty
Where the car is bought on a linked credit agreement, the finance company is a party to the transaction and carries liability for the car's quality alongside the dealer. On a personal loan, the money is yours and your claim is against the dealer alone. The Consumer Rights Act 2015 short-term right to reject, linked below, is the same in both cases; who you can enforce it against is not.
Read the car's own record before the finance
The MOT history shows every test, failure and advisory in the car's life and is free. An outstanding finance check tells you whether another funder still has an interest in it, which on a used car is the single most expensive thing to discover afterwards. Both take minutes and both are linked below.
Questions people ask about second hand car finance
Are cheap finance used cars actually cheaper overall?
Compare the total amount payable rather than the rate or the instalment. A cheap car on a long term at a high rate can cost more in pounds than a better car on a shorter one.
Do pcp second hand cars work the same way as new?
The structure is identical: an optional final payment set on a forecast value, a mileage limit and condition standards. The saving against hire purchase is smaller, because there is less depreciation left to defer.
Is used car hire purchase available on a private sale?
From some lenders, and it is underwritten more carefully because the funder has to satisfy itself about title and condition. Expect an inspection or an HPI-style check to be part of it.
Does a used car agreement carry the same statutory rights?
Yes, where it is regulated consumer credit: the fourteen-day withdrawal, early settlement and, on hire purchase and conditional sale, voluntary termination. They are linked below.