Get an affordable car loan with used vehicle finance
Buying a used car doesn’t mean you have to settle for an old model that needs repairs several times a week. You can easily get a used car in good or mint condition but at a much lower price.
The simple reason for this is that a new car loses its value quickly once someone starts driving it. If you’re looking to finance your car purchase, used vehicle finance is one of the best deals you can get. To help you choose the most suitable option, let’s see how this type of loan works.
How does used vehicle finance work?
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Calculate your monthly payment amount and the total cost of your loan
Before you start visiting car sales in person or online, you need to come up with a monthly budget. Our used vehicle finance calculator is a great tool that can help you choose a monthly repayment amount that will neatly fit into your budget, along with your other expenses.
You can find a suitable used car through auctions, dealerships, online adverts, or a private party. Make sure that the price you’re quoted is fair based on the market value of that particular model. If all is in order, obtain a purchase agreement from the seller.
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Compare used car loans and pick a lender
Use the following comparison points when choosing a loan to buy a used car:
- Interest rate. To save money, get the best low interest rate car loan you can find.
- Loan term and amount. Find out if the loan amount you want falls within the maximum and minimum range the lender has set. Typically, loan amounts range from R2000 to R250 000 while loan terms are between 1 and 5 years.
- Loan charges and fees. These range from initiation and monthly service fees to late payment fees and early payment fees. To keep the loan affordable, stick with a loan that has minimal charges.
- Repayment flexibility. You should be able to speed up your repayments without getting charged extra for it.
To apply for your second-hand car loan, use the “Go to Site” link in the comparison tables for the lender you want.
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Accept the loan offer and finalise the agreement
Once you have accepted the terms and conditions outlined in your loan agreement, you can sign the necessary paperwork. The lender will pay the required amount so you can collect your car or have it delivered.
Types of second-hand vehicle finance in South Africa
- Secured car loans. You use the used vehicle you’re purchasing as security for the loan. Because of this, these loans usually feature lower interest rates.
- Dealership financing. Many car dealerships in South Africa also offer in-house financing for second-hand vehicles. The loans are usually secured, and in most instances, they have less strict qualifying requirements. However, dealer finance can be more expensive than traditional car finance.
- Unsecured car loans. These types of loans are generally given to people who have an excellent credit score. Due to their high-risk nature, they will also come with higher interest rates. Since the financial institutions cannot repossess anything if you fail to pay back the loan, the qualifying requirements are usually strict.
- Financial lease. With this option, you rent a car. When the lease expires, you can return the car, renew the lease, or pay the residual value to get ownership of the vehicle (lease buyout).
Try our used vehicle finance calculator to get the best monthly payment
A used car loan calculator is one of the best tools to use when planning to take out a loan. That’s because the most crucial factor when taking out a loan is finding one with the best terms and costs for your budget. This can prevent situations where you take out a loan that will cause you problems later.
When using the used vehicle finance calculator from CompareLoans, simply enter the loan amount you need and the length of your term. Click calculate, and you will be supplied with an estimated monthly repayment amount.
Used car loan interest rate
Before going out to choose a vehicle, it is essential to compare interest rates on the second-hand car loan options available. The interest rate you choose can either have a fixed rate or a variable rate.
Interest rate is how lenders benefit from giving you a loan. This money becomes part of your monthly instalment as you repay the loan. A higher interest rate means a more expensive loan.
It is, therefore, quite crucial that you get the lowest interest rate possible.
Requirements when applying for used car finance
To apply for a used car loan. You should meet the following requirements.
- Be 18 years old or older;
- Be permanently employed;
- Regular, monthly income (usually minimum is R6500);
- Valid South African ID;
- Valid South African or International driving license (no endorsements);
- Bank statements and payslips for proof of income;
- A clean credit history; and
- Proof of residence.
What are the advantages of using a bank loan to buy a car?
- You can get a loan that covers 100% of the vehicle’s purchase price.
- Car finance can be tax-deductible, which saves you money.
- You get to drive the car while paying affordable instalments that leave you with some cash flow.
- Helps you establish credit if your payments are affordable and made on time.
How to get the lowest used car loan rates
- To get the lowest used car loan rates, research and compare available loan options. In doing so, you can end up finding a lender that offers competitive rates.
- You can also opt for a secured car loan. Since the lender can repossess the car, they don’t have to charge you a lot in interest.
- Maintaining a good credit rating can also go a long way in making sure that you get a loan with low rates. This is because having an acceptable credit score indicates that a person pays back their loans and makes their monthly payments on time.
Frequently asked questions
What kind of used car can I buy?
Usually, lenders insist that the car must not be a stolen, rebuilt or recovered vehicle. It should also be roadworthy with all the documents required by authorities. In some cases, lenders will limit the age of your car.
Can I get second-hand vehicle finance with bad credit?
Bad credit can discourage lenders and financial services providers from giving you loans. They can also limit your loan amount and increase the interest rate if you manage to qualify.
Should I make a deposit or choose a balloon payment?
It is always best to put down a lump sum of cash from your savings as this reduces the loan amount, your monthly repayments, and most importantly, the total cost of your loan.
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