The different ways to finance a car

Paying for your new or used car

Buying a new or used car is a big decision – it needs to fit your lifestyle, taste and, perhaps most importantly, your budget.

Nearly 1 in 5 drivers planned to change their car in 2019,1 and how they intended to finance the purchase was a key question when shopping around.


Buying a new car

5 ways to finance

Our research showed the top 5 ways people will finance their next car are:

  1. From savings (35%).
  2. Spare cash from my account (15%).
  3. Finance plan from the dealer – such as lease or personal contract (11%).
  4. Personal loan – for example from a bank or building society (10%).
  5. Loan finance from a dealer (7%).

Once you've decided how to fund your new car, you'll need to set a budget – and then attempt to stick to it.

Young people driving the car buying market

Finance is one area where age does seem to matter. The research showed drivers over 65 were 6 times more likely to spend over £25,000 than those aged 18–24. 

But while young drivers (aged 18–24) may be the hardest hit for insurance quotes,2 they're still the most likely to buy a car (33%). However, they're possibly the least likely to shop around for a good deal on finance and could sleepwalk into needlessly high debt.

Age of drivers planning to buy a car in 2019

Per cent
UK average


Young drivers are almost twice as likely as the national average (21% versus 11%) to opt for a finance plan at the car dealership or a point-of-sale personal loan (10%).

They're also half as likely as older drivers in their 30s or 40s to shop around, by also considering finance options from their high street bank or an independent lender (8% versus 16%).

Overall, just over a third of car buyers (35%) would draw down their personal savings to buy their next car – with older drivers most likely to cash in some of their investments (6% of drivers aged 55–64, and 8% of over 65s). The over 45s are also the most likely to spend more than £10,000 on a car purchase; the target purchase price in 2019 was an average of £12,080.

Almost 1 in 5 (19%) planned to change their car within a year, with second-hand cars (less than 5 years old) more popular (11%) than the allure of one with a new registration year (5%). Surprisingly, few people were interested in buying an ex-demonstration car.

AA Financial Services offers personal loans and savings accounts. Loans are provided by Bank of Ireland UK. AA Financial Services Limited is a credit broker and not a lender. AA Savings accounts are provided by Bank of Ireland UK.

1 Populus online poll of 20,410 AA Members, 13–19 November 2018. Populus is a founding member of the British Polling Council and abides by its rules.

2 The Mirror, 7 February 2019; The average cost of car insurance for a 17-year-old was £1,964.

Published 28 June 2019. Revised 26 May 2020.