If you’re just decided that you want to buy a used car but haven’t yet decided on the specifics, you still have some big decisions to make. In this article  the second in our Money Mailer series on vehicle ownership  we aim to help you with those choices by looking at four important factors:

  • Budget
  • Make and model selection
  • Vehicle evaluation
  • Finance


You might think that your budget should be whatever loan you can get plus the value of a traded-in vehicle. But things are not that simple, and this approach will result in you being unable to put more money into what is already a large expense.

When considering finance, you need to look at the interest rate (including all administration fees) and the length of the repayment period. A lower interest rate is obviously better, but so is a shorter loan as it means less interest paid over the life of a loan. Of all the money you repay a lender, you want as much as possible to be for the loan itself and not the interest accrued.

You also need to take into account all the other costs associated with owning your intended vehicle: regular maintenance (including the potential for serious failures) and the insurance needed to cover the vehicle. Of course, this is tricky one because you won’t know what kind of car you can afford until you have finished this calculation. So start with a rough estimate.

Again, be conservative in drawing up your budget. Given a chance, Murphy will strike, and you don’t want to be left with a car that you can’t afford to fix if something goes wrong, and you definitely don’t want to default on a payment.

Choosing make and model

Think of your lifestyle and what you might need in terms of size, interior space, features, and fuel economy. Then, draw up a shortlist of suitable and desired cars. The more models you have on your lists, the easier it will be to find a good deal when you start your search.

Do your homework

Once you have your shortlist, familiarise yourself with the cars and their reputations. Read reviews and look at sites like Autotrader to get an idea of average prices. It also helps to search forums to see if there are any common problems with these vehicles.

Research maintenance

Learn the price of commonly replaced parts as well as what a typical service will cost if the car is no longer under a maintenance plan. Also consider your location and whether you have easy access to a service centre or at least a place where you can get parts.

Evaluating a vehicle

As explained in a previous blog post Buying a used vs new car, the ideal car is one to two years old. These are usually still under warranty and represent good value for money (having already taken the biggest knock in depreciation), and, because they are later models, they’re more fuel efficient than older models.

Of course, a later model might not be within the budget. If this is the case, then it is even more important that you properly vet every vehicle you consider. Get a full service history, and run through the following checks, paying careful attention to any signs of serious damage.


Signs of any major repair work should be considered a serious mark against the vehicle, and you should make a list of any worn parts so that you can figure out how much you’d have to pay to restore the vehicle to a satisfactory condition.

Once the vehicle has passed the ‘yard test’, it’s time to take it out onto the road for a drive. Here you need to check that the car drives quietly, that the gears shift easily, and that the brakes work smoothly. If possible test the car on a highway and quieter roads, where you can turn the vehicle in slow tight circles as you listen out for noisy CV joints. Your radio should be off so that you can pick up any strange sounds.


If you can’t pay for your chosen vehicle in full, you will have to finance your big purchase. Luckily, there are three main options available to buyers, although your access to these does depend on a few factors:

  • The age of the vehicle
  • Whether you are buying from a dealer or a private seller
  • Whether you have a mortgage
  • Your credit score


Used correctly, a mortgage is the best way to finance a vehicle. The interest rate on most mortgages is lower than that of most car loans, and by simply restructuring an existing loan you also save yourself the hassle of applying for another one. But you have to remember that the term of a loan plays a big part in determining the overall cost of a loan. For a full explanation, read our blog article on how to finance a vehicle.

Car loan

If you don’t have a mortgage, you have have two other options: a car loan or a personal loan. A car loan is a good option for someone buying a car from a dealer. However, these loans are typically only given for cars younger than sixty months. As with any loan, a deposit will significantly reduce the cost of a car loan.

Some banks will also give loans to people who want to buy a vehicle from a private seller, but these types of loans are typically harder to qualify for and usually involve higher interest rates. If you find yourself needing a loan for a privately owned vehicle you found on Autotrader, you might want to consider the next type of loan.

Personal loan

If you decide to buy an older car from a dealer, your only option will be to apply for a personal loan and then pay cash. The same goes if you decide to buy a privately owned vehicle that doesn’t quality for the kind of loan described above. This makes personal loans a last resort – but one that has to be chosen carefully.

Because they are unsecured, personal loans usually involve higher interest rates to compensate for the extra risk. This means that loans for expensive items, like cars, can be expensive if not structured well. Here you need to go with as short a term as possible to reduce the amount of interest you incur.

Learn more 

For more useful money-related tips, sign up for our Money Mailer. In this free monthly newsletter, we serve up articles on topics ranging from saving to borrowing and everything inbetween. If you've ever wanted to know how to save for university, how to reduce your living expenses, or how to improve your credit score, the insights in these articles can leave you wiser, wealthier, and better equipped to make the most of your money.  

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