Confused over car finance? It can be used on second-hand motors
The total value of new finance taken out on used cars in the three months to April 2022 was up 34% compared to the same period in 2021.
This helped finance over 402,000 used cars, to the value of £6.3bn.
Compared to the new car finance market, it recorded just a 1% increase, with 194,000 new motors totalling £4.8bn.
Despite these figures, research from AA Cars reveals that some drivers don’t know their options when it comes to buying cars, particularly second-hand wheels.
It found 31% didn’t know they could use finance to buy a second-hand car. A majority (61%) were aware they could apply for a personal loan from a high street lender, such as a bank. Half (49%) thought a Hire Purchase agreement could be used while 34% of the near 14,000 people polled thought a Personal Contract Purchase agreement could be used.
As such, this lack of awareness means buyers aren’t able to make a fully-informed decision about the choice of vehicle they could afford within their budget, the AA said.
It found that over 80% of those surveyed said dealers could offer tailored advice to make the process of accessing car finance easier and better.
Two in five (44%) drivers said it would be helpful if dealers explained all the costs involved in making a purchase through car finance, from the monthly payments to any additional charges.
A third (31%) said dealers could also make the car buying process better and easier if they explained the different types of car finance available. See YourMoney.com’s guide to car finance for all the information.
Meanwhile a fifth (22%) would want a discount on the vehicle’s price tag if car finance were taken out through the dealer, while 18% would want the dealer to explain what would happen if their circumstances changed and they could no longer afford the monthly payments.
Understanding finance options
James Fairclough, CEO of AA Cars, said: “Car finance has proved increasingly popular among used car buyers this year, but it is worrying to see just how many have misconceptions about the finance options open to them.
“While the majority of drivers are aware that they could take out a personal loan, fewer realise that Hire Purchase and Personal Contract Purchase agreements can be used on second-hand cars as well as new.
“It is important that drivers are aware of all their options, so they can make a fully-informed decision about the car they are buying and how they are going to pay for it.
“Dealers can offer prospective used car buyers better choice, and thus a better service, by helping them understand what finance options are available, the costs involved, and by encouraging them to step back and do a comparison to ensure they choose the product that suits them best.”