Is financing a used car a good idea?
Thinking of buying a used car on finance, but aren’t sure if it’s the right choice for you? Your search for answers ends here. We’ve broken down the advantages and risks of financing a used car – and what you need to consider if you decide it’s the move for you.
Pros of used car finance
Get the car now. Who likes waiting? Buying a used car with finance means you can get the car straight away – no need for additional months or years of saving for the cash on hand. You sign on the dotted line and drive your car straight off the lot.
Get a better car. Buying a used car on finance means you are spreading the costs out over a longer period of time. This makes the individual payments more affordable – there’s no single lump sum to come up with. This can mean, depending on your financier’s credit criteria and terms & conditions, that you can buy an even better car than what you were originally budgeting for.
Keep your savings. Buying a used car on finance means you can keep your cash savings for other things, such as unexpected costs or emergencies. By spreading out the cost over a long term, you don’t lock all of your savings into the car.
Cons of used car finance
More expensive. The most obvious downside of buying a used car on finance is that you do have to pay interest on your loan. Over the course of the loan, usually a few months to a few years, this can add up. It’s more expensive, no hiding that!
Need for insurance. In New Zealand, you have a lot of options on how much insurance coverage you get on your car. You could go for third-party insurance alone, theft & fire, or a fully comprehensive, full-replacement policy. But when you buy a used car on finance, your lender may require you to take out (and keep) a comprehensive insurance policy.
Restrictions on sale. If you buy a used car on finance, your lender will use it as security. This means there may be restrictions on what you can do with it, including when you can sell it. Usually, this isn’t a problem, and just requires you to call your lender and tell them you’re planning to sell the vehicle. This is another hoop to jump through though, which can make the car harder to sell.
3 tips for buying a used car on finance
If you do decide to buy a used car on finance, here are a few important tips:
- Be specific. When you go to get car finance, make sure you know the full details of the car you intend to buy, including make, model, service history and more. The more information you have, the better idea the lender will have of whether they will lend to you or not.
- Understand your contract fully. Car loan contracts have quite a few moving parts, and it’s important that you understand the full costs and fees involved. In particular, understand what your lender will do if you miss a payment AKA default fees.
- Work with reputable lenders. Responsible lenders will ensure you fully understand your loan and will work with you if things go wrong. If you feel rushed or the deal sounds too good to be true, go elsewhere!
This last tip is why so many used car buyers choose to work with dealerships. We can help you with finance that you understand that works for you and gets you behind the wheel, faster – often on the same day.
For more information about buying a used car on finance and your car loan options, get in touch with the team at Nicholson Auto today.
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