How do I finance a used car

Used Car Financing: Which Car Loan Is The Best For Your Used Car?

How can I finance a used car?

Buyers of used cars finance a good third of the purchase price with an average of € 4,000 through a loan. If the savings are insufficient or are otherwise planned, there are several options for used car financing:

Buying a used car in installments is also possible without a bank - for example directly through the dealer.

The used car loan with installment payment is the classic

Buying a used car in installments is the most common type of financing. With a car loan for used cars, you benefit from interest rates that are cheaper than, for example, a vacation. Because the bank counts the car as security because it can be turned back into cash at any time. As a rule, you have to deposit the registration certificate II - formerly the vehicle registration document - as security. From a purely legal point of view, the car then belongs to the bank when it comes to financing used cars.

The amount of the installments for your used car loan depends on the amount of the loan and the term. This means that the costs are fixed for the entire term and you do not have to be prepared for high final installments or residual value calculations. To find good conditions and thus finance your used car cheaply, you can use our car loan comparison, for example.


  • Predictability through fixed rates
  • Lower interest rates due to earmarking


  • Legally, the car belongs to the bank
  • The monthly load can be high

Secure the lowest-interest loan for your used car now. You can find all the top offers in our loan comparison.

Tip: If you have a high loan for a young used car, the question arises as to whether a new car financing might not be advantageous for you in comparison. For example, when a manufacturer lures a new car offer with zero percent financing.

Balloon financing or 3-way financing: used car loan with a high closing rate

The big end comes at the end - according to this motto, the so-called balloon financing works. In comparison to the classic installment loan, you usually pay a small down payment followed by lower monthly payments. This works spontaneously like cheap car financing for a used car. At the end of this used car financing, however, there is a huge final installment - the balloon - to redeem the loan. You can either settle it with a one-off payment or arrange follow-up financing. Or you can return the car to the dealer. The total cost of balloon financing is usually higher than that of a classic installment loan.

The 3-way financing works in exactly the same way: After a small down payment and monthly installments during the term, you can ultimately choose one of three ways: Either you pay the final installment as a whole or you choose follow-up financing with the risk of higher interest rates. Or you can return the car to the dealer - for which, however, a repurchase agreement must be concluded beforehand.

When does balloon financing make sense?

Nevertheless, balloon financing to finance the used car can be useful in certain situations. The lower rates mean that you have a lower monthly burden than with a classic loan. If you can expect a gift, an inheritance, the payment of capital from a due building loan agreement or significantly higher monthly income due to the partner's return to work from parental leave, you can accept the high final installment .


  • The monthly load is lower
  • The closing rate is lower than the residual value


  • Higher total cost
  • High closing rate

Already knew? Some car manufacturers are increasingly promoting leasing models for young used cars. These are often annual cars with low mileage. A comparison of the leasing installments with the installments due for a loan, for example, can be worthwhile, since manufacturers sometimes want to create space in their inventory on the way to lower leasing installments. Then a used car can be financed cheaply.

Used car leasing: the disadvantages outweigh the disadvantages!

Only between 1 and 2% of used car financing recently came from leasing contracts. Strictly speaking, leasing is not used to finance a used car, as the lessor remains the owner of the car. The lessee pays, so to speak, a fixed monthly fee for the use of the car. However, after the agreed term, the vehicle can usually be taken over at its residual value. Leasing can be attractive for business people because the installments can be deducted from taxes. For private individuals, this is used car financing, in which they have to pay attention to a few points.

In the case of a used car leasing, for example, you enter into obligations for annual mileage. In addition, there is a risk of high back payments if the car is ultimately below the agreed residual value, for example due to damage such as falling rocks.


  • Tax advantage for business people
  • Vehicle can be returned


  • Requirements for mileage
  • Additional payments in the event of impairment

House banks sometimes grant more favorable terms if you can confront them with a specific offer. Alternatively, you can arrange cheap car financing for the used car with some manufacturers via their car bank. Some dealers grant discounts on the purchase price for a used car installment payment by private customers through their in-house bank, which reduces the overall burden.

What Affects the Cost of a Used Car Loan?

It is important that you mark the loan as a car loan when you apply for it. Because with this purpose you get more favorable conditions than with a freely available loan. The following factors also play a role:

  • Your individual creditworthiness - the higher the bank assesses the risk with you as a customer, the more you have to pay. Check your own Schufa entry to see whether it is correct!
  • Are you applying for the loan alone or as a couple? For example, if you include your spouse as the second borrower, this can reduce costs.
  • The term of the loan - the longer the loan runs, the more you pay in total for the interest and the more expensive it will be in the end.
  • Down payment and final installment - a down payment can reduce costs just as much as a high final installment. When comparing loans online, you should change these variables and find the offer that is most advantageous for you. The option of a special repayment can also be useful if you expect extra income during the loan period.

FAQs on used car financing

How long should I finance my used car?

Not too long and not too short - experts recommend between 3 and 5 years. Too short terms often lead to very high rates, which reduce the scope for other expenses. Longer terms not only mean increasing borrowing costs. Often the question arises whether a car is still economical after 6 or 8 years - or whether a new acquisition is due due to the increasing number of repairs. For this, a still existing old loan would only be an additional burden.

Should I finance my used vehicle with or without a down payment?

That depends on your living conditions. Used car financing without a down payment and final installment may seem tempting. However, if you can raise a deposit, it makes sense to reduce your current installments. If that would cost you all of your savings, you'd better forego it.

What advantages do I have as a cash payer when buying a used car?

The classic cash payer has the advantage that he is completely free to use his used car, as he is not accountable to any lender. The bank or the dealer can set specifications and, for example, limit the loan to other people. Otherwise, when it comes to financing used cars, dealers prefer to conclude a loan agreement with you themselves, because the manufacturers have often reserved certain lines of credit with correspondingly favorable conditions for dealers through their car banks.

Can I transfer my used car loan to someone else?

In principle, the credit can be transferred to another person. However, the bank has to agree to this. The basic requirement is the creditworthiness of the new borrower.

What happens if my used vehicle is damaged during the financing?

Often times, the bank also requires a fully comprehensive insurance to be taken out for a used car loan in order to reduce the risk. Even if this is not required, you should take out fully comprehensive insurance. Because the car usually serves as security for the bank - if this security is lost due to a total write-off, the loan may be repaid immediately. If you had to leave the vehicle registration document as security, you must inform the lender in the event of damage. In the case of 3-way financing of the used car, the lender can also request repairs in a specialist workshop designated by him.

Can I cancel the funding or end it early?

The usual 14-day right of withdrawal applies. This is particularly important with a used car: If the purchase is still invalid due to a defect, you do not remain on the credit with the revocation. If you want to prematurely terminate the loan agreement in the further course, costs are usually incurred. Such as the early repayment penalty, which is capped at 1% for a term of more than 12 months.

How do I finance a used motorhome?

Basically, the cheaper dedicated car loans can also be applied for by private individuals, such as used cars with installment payments. However, not all banks offer loans for used motorhomes. Therefore, interested parties should first get an overview of the providers.

Always open the full invoice before signing a loan agreement. In other words, add the cost of the loan to the negotiated purchase price for the car and compare the total with a competing offer. Some retailers are more expensive when it comes to credit, but then give a discount on the purchase price - or vice versa.