Buying a used car with finance? Keep this guide handy

Buying a used car with finance

If you are on a tight budget or are new to driving may be, buying a used car is a good option. And with so many stylish and power-packed models available in the market today, you are likely to find what you are looking for without worrying about money matters. Plus, various financial institutions now offer affordable loans for second-hand cars. Therefore, if you want a good deal on a used car, follow this guide on buying a used car with finance.

  • Compare the Used Car Finance Options

As opposed to new car loans, used car finance usually comes at a higher interest rate and a lower LTV ratio. The interest rate and LTV ratio on a used car loan, however, differ from one lender to the next. Most lenders provide 80% of the loan value; though, some may ask for a 20%-30% down payment. As a result, comparing funding options with different lenders is always a good idea.

  • Check the Charges Associated with Used Car Finance

Compare processing costs, foreclosure fees, and part-payment fees before committing to a used car loan. You should also compare the collateral charges and ECS swapping charges. Also, the tenure it takes for a lender to foreclose or accept a partial payment varies from one lender to another. 

After you have done your homework on used car finance, it is time to weigh the things you should check when buying a pre-owned car.

  • Explore Seller Options

In India, you can buy a second-hand car from individuals, dealers or second-hand car brokers. One of the advantages of purchasing a used car from a reputable dealer is that you can get transparent paperwork as well as some additional benefits. As a result, to get a decent price, it is necessary to explore the options with various dealers.

  • Inspect the Car 

Get the second-hand car you intend to buy thoroughly inspected by a mechanic you can trust. Take a look at the dents, cracks, welding and rusting, if any. This can either help you get the owner to resolve the issues before the purchase or help you negotiate the price.

  • Take a Test Drive

Taking a test drive on various types of roads is an essential part of purchasing a used vehicle. Check the steering wheel, brakes, gears, and headlights to ensure proper operation. You should also listen to engine noises and vibrations. A test drive will also give you an indication of the car’s mileage.

  • Check the Documents 

Checking the car’s document is as critical as inspecting the vehicle’s overall condition. Certain documents must be checked before buying a second-hand car, like –  

  • Registration Certificate
  • Vehicle insurance papers
  • Original Sales Invoice
  • Road tax receipt
  • Pollution certificate
  • Form 35 if the car was financed, along with the No Objection Certificate copy from the lender 

Any modifications to the vehicle, such as a new body colour or engine, must be documented in the registration certificate. You must also match the chassis and engine numbers with the numbers on the registration papers. Last but not the least, ensure that the vehicle has no previous accidents. 

  • Check the Liens 

When purchasing a second-hand car, buyers must ensure that there is no unpaid loan on the car. Even if you paid the seller full price, the car could be repossessed if there is already an unpaid lien.

  • Check the Age of the Car 

Depreciation reduces the value of older vehicles. You may have also noted that the cost of a new car tends to drop sharply after its purchase. Prices would undoubtedly decline, regardless of how high they were at the time of purchase. In general, avoid buying vehicles that are more than five years old because they will cost you more money in repairs and maintenance. Also, stay away from cars that have been phased out of the market. In such cars, replacement parts can be expensive and difficult to get. Apart from the preceding factors, also check the warranty and extended warranty papers along with the repair bills. 

  • Negotiation

There is always room for negotiation when purchasing a car from a dealer or an individual. Do your homework on the selling price of identical vehicles. Deals that sound too good to be true should be avoided, and do not hesitate to walk away if you feel something is wrong.

  • Transfer of Ownership

Ask for registration and insurance papers from the seller before you sign the deal. You can also double-check the documents mentioned above. Those documents must be present to acquire vehicle ownership. However, if the required documents are not in order, you can have issues with the registration authority during the transfer of ownership.


The interest rate on your used car finance is directly proportional to the condition of your used car. As a result, by following the above guidelines and thoroughly comparing lenders, you can obtain a car loan at a reasonable cost. By following the above tips, you can not only get a loan, but also a great second-hand vehicle.

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