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Used Car Finance Options

| In Buying Guides

When it comes to buying a vehicle, car finance is the UK’s favourite way to do it: 75% of cars bought through dealerships in the UK are paid using finance options. This is why we’ve put together a guide to help you find which car finance options are best for you.

There are several alternatives when it comes to used car finance in the UK, including personal leasing, loans, cash and savings. Here’s a look at the 2 most popular types of car finance for used cars: Personal Contract Purchase and Hire Purchase.

Personal Contract Purchase (PCP)

PCP Finance stands for Personal Contract Purchase and it’s a type of used car finance that allows you to afford a more expensive vehicle for less per month, which is why it’s so popular.

With PCP, when you purchase a new or used car you can benefit from low monthly payments, and it stands out from other used car finance options since it gives you plenty of choices of what you want to do at the end of the contract.

Can You Give A Car Back At The End Of PCP

Once you have reached the end of the agreed PCP deal with your lenders, you have 3 alternatives:

  • You can hand back the car at no extra cost subject to the agreed terms and conditions
  • You can trade it in and start a new PCP deal
  • You can pay off “the balloon” (a big lump sum payment at end of your contract) to buy the car. Incidentally, having the final balloon payment is the reason why you generally pay less money each month.

Although PCP is one of the best used car finance options, it does have some drawbacks: With a PCP used car finance agreement you have to stick to pre-agreed mileage limits: this means that if you did more miles a year than you agreed you will have to pay for those extra miles. The typical price for exceeding a mileage limit is £0.20 per mile.

Another drawback is that you need to keep the vehicle in a good condition, so if choose to return the car at the end of your contract; you will have to pay for any cleaning/damages that you have allowed to happen during the deal.

Hire Purchase (HP)

HP or Hire Purchase is one of the most popular car finance options, particularly for used cars, if you want a simple way to get car finance, and want to own the vehicle when the contract is finished. 

Do You Own The Car After HP Finance 

In simple terms, with HP you hire the car until the last payment is made; then you have full ownership of the vehicle. If you sign a deal for HP, you will pay a deposit first that is usually up to 10% of the car’s value. You then continue to pay once a month until you have paid for the full value of the car. Normally this will take between 1 to 5 years depending on the terms of the deal you arranged with the lender.

You pay once a month, but the deal is very flexible: you can pay a lump sum whenever you want and not get charged; unlike PCP where if you pay any extra then you will be charged. Due to having a fixed rate of interest, you can rest easy knowing exactly what you will pay each month.

When it comes to used car finance, bear in mind that Hire Purchase cannot cover vehicles over 10 to 12 years old, the age of your car at the end of the term depends on your finance lender. At the end of your finance term, the car cannot be more than 10 years old; so if a car is 7 years old the maximum repayment term will be 3 years. If you have a 12-month plan you can only take out a 4-year finance deal on a car that is 8 years old.

Something to consider about HP is that you can’t sell or modify the car without approval from the lender. Once you have completed the contract, then you will have to pay a completion fee and, depending on your provider, 2 months interest.


There you have them: 2 types of car finance that are the most attractive if you have your eye on a used car. Now, take a look at the 6 best cars to finance according to Cargiant experts.