The next twelve months will see one in five people buying a car, but not necessarily a brand new one. The AA estimate that of the six million people replacing their cars, 67 per cent will be second hand .

According to the AA the average amount spent on a second hand car is £7,000 the majority of cars sold will be less than three years old. The reason many have for buying a used car is obviously cost but also the depreciation factor. New cars lose much of their value in the first year. Therefore buying a nearly car can be good value for money .

Lloyd East, general manager of AA Financial Services, said, A car is probably the second most expensive item people will buy, after their home, so it’s understandable that, with the financial savings available, the second hand market is the most buoyant.

When buying a second hand car you need to search out which car is suitable for you then you need to find the finance package.

You can buy a second hand car through a private sale, by searching in the local paper, the internet or an auction. This is the cheapest option but the risks are greater too. You have to look out for cars that are subject to outstanding finance. A small payment to hpicheck.com, rac.com or aacardatacheck.com will ensure this won’t be a problem. Another problem is if the car has been stolen but offered for sale.

It is best to investigate the roadworthiness of the car by getting it inspected. If you do not know of anyone you can pay £150 to the AA or the RAC to examine the car for you.

The AA found that one in five people will use a personal loan to finance their purchase, one in six will use the proceeds of the sale of their current car to pay for the next one, but one in ten will use dealership finance which is very expensive.

Mr East said, While many people will shop around for their ideal car - looking at different makes and models - it's clear they don't do the same when it comes to finance.

Cheaper finance can be obtained by using an online loan search facilities to help you find the best deal. These will be cheaper than dealerships and some banks or building societies . Go to www.personal-loans.co.uk or www.carfinance.co.uk for online search tools.

Getting the right price for your car is also important. Many sites now have online valuation tools to give you an idea of what your car is worth. Such calculators will give you an estimate value for a private sale, a trade price and a part exchange value.