How to get finance for a used car

How to get finance for a used car

Buying a car can be both exciting and confusing, especially for those who are first-time car buyers. Before you are even able to start looking for your dream car, you have to be approved for vehicle finance, which can feel like an impossible task. But there are some simple steps you can follow to reaching this goal.

Get your documents in order

When applying for vehicle finance, you will need to supply your chosen bank or financial institution with the following documents.

  • Clear copy of your Valid SA Identity Document or Identity Card.
  • Clear copy of your Valid SA Drivers licence.
  • Proof of income (last three months pay slips)
  • Proof of residential address (utility bill, telephone account – not older than three months).
  • Insurance confirmation letter from your insurance company

It is important to note that your bank will perform a credit check, so, before you can contact any used car dealerships, you will have to undergo a credit history check and if the results are negative, you will need to be able to explain the reasons why.

Get pre-approved

Getting pre-approved for a loan by a bank or financial institution means that you can come into the dealership with an amount they need to either match or beat in order to secure your business.

This hypothetical loan can be given after you have taken the necessary documents to a bank or online lender. Discuss the interest rate and the total spendable amount of money and be sure to carefully study all the terms of the pre-approval with regard to used cars especially. Many lenders will only approve choices of certain dealerships and cars under a certain mileage. So, be sure to be very certain of these terms before you start going to dealerships.

Choose the loan terms

Once you have settled on a loan, you will have to discuss the terms of the loan with the bank, financial institution or dealership. This is a vital step as it will ensure that you are not going to be paying more than you are able to and will allow you to choose how long you are going to take the loan for.

You can also discuss whether or not you will need a down payment, which is usually unnecessary with a used car, but can help to lower the monthly repayments significantly. A bigger down payment could also persuade your lender to give you a better interest rate. You should seriously consider the length of the loan as a shorter loan may give you less interest but larger monthly payments and a longer loan will mean more interest but smaller monthly payments.

Consider trading in your old car

If you have an old car that you will no longer be using once you buy your new car, you should consider trading it in and using the payment from this as a downpayment for your finance. If it is a substantial amount, you could use this instead of using finance to buy a car, but you will most likely not reach your goal amount due to your car having depreciated in value.

Before you trade in your car, you will need to find out your car’s value and shop around for the best deal. You will need to make sure your car is presentable before you sell it and find out exactly how much you are able to trade your car in for. Find out what the settlement amount is if you still owe money on your car.

Try a balloon payment

If you are interested in finance but want to have lower monthly payments, you can look at adding a balloon payment to your loan. A balloon payment is a lump sum payment that you will owe to the bank once all your monthly payments have been made and the loan term has ended.

It will affect the amount of your monthly payments as well as how much you will owe at the end of the loan term. If you borrow R200 000 over five years, and choose to have a balloon payment of R50 000, you will notice your monthly repayment amounts will be lower but you will still owe the bank R50 000 at then end of the loan term.


Choosing to finance a used car is a big decision, but it is not a difficult process if you go into it prepared and informed. Remember to have all the necessary documents ready, be prepared for a credit history check and always be sure to read the fine print. Soon enough you will be speeding off in your new wheels.

Authored by: Pete Anderson

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