General information on used car financing

The days of the scrappage incentive are over, and many drivers are now thinking more about buying a used car rather than a new one. Such a vehicle, however, needs to be financed — this is possible with a good and affordable used car loan. Vehicle financing is available for both new and used cars via quite different channels and also at very different interest rates and terms.

A used car loan can be taken out through a bank, often through the dealer where the vehicle is purchased, or via a credit broker who can arrange a loan from abroad. There's also the option of getting a loan from private individuals via lending platforms to buy a used vehicle. Before taking out an installment loan to finance a used car, you should consider the various levers and loan types. Loans differ not only in down payment, term, interest rate and final installment, but also in the type of financing — through banks, dealers, brokers or lending platforms. It can therefore pay off to inform yourself thoroughly about financing before buying a car.

Used car financing through a bank

One option to finance a used vehicle is to take out a used car loan through a bank. Often the vehicle registration document is lodged as collateral for the loan. This, of course, has the downside that if problems arise with repayment the bank may repossess the vehicle used as security, while the loan itself still has to be repaid.

Financing a used car through a bank is therefore often a double-edged sword and should primarily be considered only if the car loan is cheaper at the bank than elsewhere, and if it is not absolutely necessary to hand over the vehicle registration document as collateral for the used car financing.

Used car financing through the dealer

Besides financing a used car through a bank, there's also the possibility of financing through the dealer. Some dealers grant loans themselves, while other used-car dealers work with a bank and therefore only broker a loan to the buyer.

Here, too, you should check whether the vehicle registration document must be handed over as security or whether the loan is granted "for free use" and can therefore be taken out without collateral.

Whether you want to take out such a loan through a dealer depends on how dependent you want to be when buying a used vehicle and also on whether the used car financing arranged through the dealer is actually affordable or just convenient.

Used car financing through a credit broker

Another option for financing a used car is to take out a loan through a credit broker. The car buyer thus saves the effort of going directly to several banks, submitting loan requests, and then receiving loan offers.

There are several reputable credit brokers that work with banks domestically and abroad and therefore have many options to arrange used car financing. They can arrange both loans with a Schufa record and loans without Schufa; this also depends on the borrower's wishes and previous Schufa record.

Even those who only have a few small blemishes on their consumer credit record often find it difficult to obtain a loan in Germany through normal channels. The disadvantage is that even borrowers who can demonstrate a regular income may be excluded from being granted loans. Good credit brokers recognized this dilemma many years ago and offer loans with and without Schufa for brokerage.

There is nothing wrong with taking out used car financing through a credit broker, but as with all contracts you should look closely and compare the terms of the different providers. Depending on the credit broker, the amount available for a loan without Schufa may also be limited to a few thousand euros. However, if you buy a small or inexpensive used car, this form of financing could be just right.

Used car financing with a loan without Schufa

Loans without Schufa sometimes still have a bad reputation. Unjustly so, as reputable credit brokers repeatedly demonstrate. If you look closely at such a loan offer and do not blindly pay processing fees in advance, you can also obtain a good and above all reputable loan without Schufa in this country.

And even for used car financing it is possible to finance the purchase of a used vehicle on good terms with a Schufa-free loan. These are made possible by so-called Swiss loans.

Since loans without Schufa are not offered by German banks but can be obtained from foreign banks via credit brokers, buying a car with such a Schufa-free loan is possible. Loans without Schufa are often referred to as Swiss loans in the context of used car financing. This originates from the fact that this form of loan was initially offered only by Swiss banks, but has long been available in Germany through credit brokers.

Used car financing via a lending platform

There are different ways to finance your new used vehicle. Besides loans from banks, dealer car loans and loans via credit brokers, there is also the possibility of getting a loan from private individuals via a lending platform. By using such a lending platform, the borrower often does not have to go directly to a bank, but can in many cases set the interest rate to be paid themselves.

A provider comparison for peer-to-peer loans is recommended; depending on the platform, a loan without Schufa may also be possible, but this is not available from every provider of private loans. The advantage of a loan via a lending platform is obvious: usually the vehicle registration document does not have to be lodged as security when taking out the loan for the car purchase.

Used car financing – conclusion

Taking out a loan to buy a used car is by no means rocket science. If you have a regular income, you have the opportunity in Germany to obtain financing for your new used car. Whether with or without Schufa, the range of loan offers remains very large. There are many variables, such as the size of the down payment, the interest rate, the term and the final installment.

If you want to buy a used vehicle, you should therefore not hesitate to look for a good used car financing option. Many things are possible, and if you compare thoroughly you will find a good and, depending on your creditworthiness, even a cheap loan to buy your used car.