A vehicle history check is crucial if you’re buying a used car. It provides important information on the vehicle’s true value as well as how safe it is. This can give you bargaining power to negotiate a lower price. It can also avoid the need for a costly bad-credit car loan if you have a low credit score.
Financing issues when buying a used car
Many second-hand cars are acquired with the help of financing.
In some cases, the “owner” may not actually own the car and therefore have no right to sell it. It may be the subject of a personal contract hire (PCH) agreement, for example. This is a leasing contract with no option to buy the car.
In other cases, the vehicle may have outstanding finance. In other words, the car owner still owes money to a lender. This can happen with HP (hire purchase), personal contract purchase (PCP), or a personal loan.
Without assessing the vehicle’s background, you’re likely to remain unaware of these financing issues.
But knowing you’ll have to take on the car owner’s debt yourself gives you the option of driving down the price of the vehicle or walking away from the deal altogether.
Other factors that lower a car’s resale value
Besides financing problems, there are other factors a vehicle history check can reveal that give you the opportunity to negotiate a lower price for the car you’re buying. These include:
- The value of a car depreciates significantly over time as it sustains general wear and tear and clocks up the miles.
- Some car makers have a better reputation than others for vehicles that hold their value.
- If a car hasn’t been regularly and properly serviced, the owner should expect a lower price for it on resale.
What does a car history check involve?
A check on a vehicle’s background reveals a wealth of information about its past. This will tell you if there are hidden issues with the car you’re about to buy. Areas that a comprehensive car history check covers typically includes:
- Verification of accurate mileage. Checks for inconsistencies in how far the car has travelled, including mileage and clocking reports from the vehicle’s MOT test records.
- The extent of damage to a car that was in an accident. Whether it’s been declared a write-off because the cost of repairs would be more than the car’s worth.
- Whether the car has outstanding debt on it. Whether it’s been tracked by a third party because of a financial dispute over ownership.
- The number of previous owners and how long each one kept the car.
- Whether the vehicle is recorded as stolen by the police national computer.
- The car’s service and maintenance history.
Important considerations when financing a used-car purchase
Loans to buy a second-hand car typically come with interest rates higher than those for a new car. This is because new cars are a lower risk for lenders. If the borrower defaults, a new car makes it easier for them to recoup their losses.
Avoiding used-car financing or minimising interest charges by borrowing less can therefore save you a lot of money.
If a car history report unearths problems, it gives you the upper hand in price negotiations. This may mean you may be able to pay in hard cash, eliminating the need for financing altogether.
Or you could at least get the price down to a level where you don’t have to borrow so much to finance your purchase.
If you do need financing, a low credit score may mean the only avenue open to you is a bad-credit auto loan.
Bad-credit car loans
Bad-credit auto loans enable individuals with a poor credit rating to obtain financing despite being a high risk.
The problem is that some lenders will leverage this situation to their advantage by hiking up interest rates because they know your chances of getting a loan are limited. There may also be stricter terms or additional fees.
The extra cost of a bad-credit car loan may mean the monthly payments are so high you can’t afford the car you want because it would place too great a strain on your household budget.
It is possible, though, to avoid this problem if you find a broker specialising in car finance for people with bad credit. From their network of lenders, they can find you the best deal at the most affordable rates.
Reliability and safety risks of buying a used car
You need to know you’ll be safe on the road with the car you’re buying, and reliability goes hand in hand with safety when it comes to cars.
One of the main problems when buying a used car is whether you’ll be able to rely on your vehicle. If it’s constantly breaking down, you can be faced with huge repair bills as well as safety concerns.
Unlike new cars, second-hand cars aren’t usually packed with hi-tech features to ensure safety and reliability. And the more miles on the clock, the less reliable a second-hand car is likely to be. A further issue is that some new cars become less reliable after a few years.
Without a background check on the car, you won’t know whether the owner maintained the vehicle properly and had it serviced regularly. If they didn’t, this can be another reliability concern.
Too good to be true?
Buying and running a car is most people’s single biggest financial commitment after their mortgage or rent. And for many the cost of a brand-new car is prohibitive, especially in a cost-of-living crisis.
However, buying a second-hand car comes with risks. This makes checking the vehicle’s history critical in order to make an informed purchasing decision. You may find what looks like a good deal. This may be genuine, but if it looks too good to be true, it probably is.
Financial and safety peace of mind
Buying a used car without checking its history puts your safety and your money at risk.
Once you buy a car, it becomes your responsibility and you’re liable if the vehicle has outstanding finance or safety issues that may be expensive to resolve.
A car history check will give you all the information you need to provide peace of mind before buying the vehicle and help you make sure you’re paying a fair price for it.
