The popularity of hybrid cars makes them an obvious choice for buying used, but have you considered the pros and cons of both regular hybrids and plug-in hybrid electric vehicles (PHEVs)?
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Buying a used car with finance: what to know
A used car can be a more affordable option than buying new, and finance may help manage the upfront cost. Here’s what to check before you commit.
When we talk about car finance, the default is to immediately think about new cars. But you can finance a used car through many of the same lenders that will help you with a new car, including RACV Car Loans.
There are some specific aspects to buying a used car with finance, and in this article we'll take you through what you need to know when considering used car finance, second-hand car loans, and the broader options to buy a used car with a loan.
Carlos Gasser, General Manager of RACV Finance, explains that one of the key differences is the interest rate, which tends to be higher for used car finance to reflect the higher lender risk and less certain resale value compared with financing a brand-new vehicle.
"Generally, you'll get a higher interest rate for a used car than you would for a new car, but otherwise it's very similar," Gasser says.
"The used car market is a little bit more 'buyer beware': you're dealing not only with dealers, but potentially private sellers. This is where you want to be really sure about scams and who you're engaging with, whether that's Facebook Marketplace, Gumtree, a friend, a private seller or a dealer. The range of sellers you're dealing with is broader and can bring more risk."
Benefits of financing a used car
One potential benefit of financing a used car is that the purchase price may be lower than a comparable new car, which could mean borrowing a smaller amount. This can make used car finance worth considering if you’re on a tighter budget but still need a vehicle.
While you may end up with a higher interest rate, depending on the lender, borrowing a smaller amount may reduce the total interest payable, depending on the loan term, fees, repayments and your individual circumstances.
Another benefit is that some lenders, such as RACV Car Loans, may carry out checks on the person you are buying from, which can help reduce some payment and verification risks. However, these checks do not guarantee ownership of the vehicle or eliminate the risk of scams, so buyers are still responsible for doing their own due diligence.
More: How to buy a used car with confidence using our checklist
The 2024 Kia Cerato could be your next used car purchase.
How much you can borrow for a used car
Gasser says this is no different than if you apply for a new car loan, with the standard checks on income and expenses. Lenders will assess your financial position, expenses and credit history before approving a loan, to help determine whether the repayments are likely to be manageable for your circumstances.
Using a service like RACV Car Match is a great idea as it allows you to research the used car market and not only get a price guide for the models you are considering, but also provides an estimate of running costs and other expenses, so you can understand the total costs you’re facing.
More: Australia's best underrated and affordable used cars, SUVs and utes to buy
Depreciation & resale value of a used car
Another major benefit of buying used is someone else has already taken the initial depreciation hit. But it is a double-edged sword, as obviously the car will continue to depreciate, so you want to make sure you stay ahead of the loan.
Looking for cars with a strong resale history, such as popular models with consistent demand, may help reduce depreciation risk and put you in a better position when it comes time to sell or trade in your car.
The 2024 GWM Ora was well-reviewed, making it a great option for a used EV.
Vehicle inspections & warranties for a new car
If you do decide on a used car, then before you complete the deal you need to have it inspected for any major faults and check the balance of its new car warranty or any extended warranty the original owner may have taken out.
RACV Accredited Auto Care Centres offer vehicle inspections, so you can get a report from a qualified inspector on the condition of the vehicle. These reports can highlight potential issues that could become expensive problems in the future, or help give you peace of mind that you’ve picked a suitable option.
In Victoria, eligible used cars bought from a licensed motor car trader must come with a statutory warranty if the car is less than 10 years old and has travelled less than 160,000km.
Consumer Affairs Victoria says the car’s age is determined by the date stamped on its build plate, and the warranty lasts for three months or 5,000km after purchase, whichever occurs first. This protection does not apply to private sales, and some vehicles or defects may be excluded, so check the warranty details before buying.
More: Should I buy a new or used car, and is a new car worth the extra cost?
R.A.C.V. Finance Limited ABN 82 004 292 291 Australian Credit Licence No. 391488. RACV Finance is subject to RACV lending criteria. Conditions, fees and charges apply.
Advice given in this article is general in nature and is not intended to influence readers’ decisions about financial products. You should always seek your own professional advice that takes into account your own personal circumstances before making financial decisions.
