If you’re purchasing a used car with the assistance from a bank on the high street you might be wondering ‘for how many years will a bank finance a used car?’ The answer is that this may vary depending on a number of factors, such as your financial history and what kind of finance you are looking to take out.
Making an application for finance from a bank
If you’ve got a good history with your personal bank, then making an application for any term of finance can be a very convenient way to acquire lending support. The bank will already possess all your information, from your personal details to your financial history, such as savings, monthly outgoings and regular income.
You might find however that other banks offer better interest on finance than your personal bank and decide to apply with one of them instead.
Buying a used car from a bank
Buying a used car upfront in one payment with cash is always the most cost effective way of purchasing as it cuts out the interest you will pay, but not all car buyers can afford to do this. After cash buying, a car loan is the least expensive form of finance to secure yourself a used car.
You borrow a sum of money from the bank to buy your chosen vehicle and then you pay it bank over a typical term of 12 to 60 months. You pay in regular monthly instalments, which will include interest on your loan. When all repayments are made, the debt is settled and the used car is yours.
Length of term affects size of repayments
Typically with finance for both new or used cars, the lengthier the term over which you make your repayments, the smaller the size of your monthly payments will be. However, as you’re borrowing over a lengthier period of time, you’ll be in turn be paying more interest, so the total sum you pay will be higher.
If you repay your used car finance within 12 months, the monthly instalments will be higher but you won’t be paying so much interest, however you may find that smaller amounts can be more manageable for you over a 60-month payment plan, making this a more realistic option.
Saving a deposit
Prior to applying for any kind of car finance over any length of term, it’s worth considering saving up for a deposit to put towards your purchase on a used vehicle. By being able to offer a deposit, you’ll not only look like a better prospect to banks and other lenders, but you will be able to secure smaller monthly repayments.
If you’d still struggle to pay the size of monthly installments offered to you over a five-year plan (60 months), then saving a deposit for your car is a way of making your purchase more affordable. Possessing a deposit, you’ll need to borrow less to buy your car, so your monthly repayments will be smaller.
Other forms of finance available from banks
While known for providing personal loans, sometimes referred to as “car loans”, banks like many other lenders will offer different forms of finance. Two common options are Hire Purchase (HP) and Personal Contract Plans (PCPs).
As experts in the automotive industry, we’re perfectly placed to offer assistance and advice on all aspects of car finance here at Car.co.uk. If you’re looking for a finance agreement over a longer length of term to pay for your used vehicle, we’ll do our best to find you a match.