Used car loans: what lenders here actually agree to

Financing a used car is ordinary, but the terms are not the terms on a new one, and the difference surprises people at the wrong moment.

Three things decide whether it is possible

• The age of the car. Most lenders stop somewhere around eight to ten years old at the end of the loan, not the start. A seven-year-old car on a five-year term is a twelve-year-old car when you finish, and that is often refused.
• The lender's valuation, not your price. Banks fund a percentage of what they think the car is worth. Negotiate well and you may find the loan covers less than you expected, because the funded amount fell with the valuation.
• Clean papers. A car whose RC still shows a previous lender cannot be financed until that is removed.

What to arrange before you commit

• Get the loan approved in principle before you agree a price. An approval that arrives after the seller has moved on is worth nothing.
• Ask what the lender will fund as a figure, not a percentage.
• Check whether processing and documentation charges are added to the loan or paid separately.

Buying from a private seller

Harder than buying from a dealer, because the money has to move in an order that suits the bank, the seller and the RTO at once. Some lenders will not finance a private sale at all. Ask before you find a car, not after.

The arithmetic worth doing

On an older car, a short loan at a used-car rate can cost more in interest than the difference between two cars you were choosing between. Work out the total you will pay, not the monthly instalment — the instalment is designed to look reasonable.