Dealer financed used car sales rose 21% in August compared with the same period last year, according to the Finance and Leasing Association.
Although finance options offered by dealers proved more popular with used car buyers, the number of new car purchases through the schemes fell 12% among individuals and 26% among businesses.
The figures reflect a growing demand for used cars among budget-conscious motorists who are looking for good value and cheap car insurance.
"Following the withdrawal of a range of incentives to 'buy new', consumers have returned to the used car market where lower prices are attractive and mean that buyers need to borrow less," said Paul Harrison, head of motor finance.
"However, despite strong growth this month it must be remembered that August 2009 was a weak month when the country was still in recession.
"While we expect sales of new cars, particularly prestige cars, to recover slightly towards the end of the year as consumers seek to beat the VAT increase, there is also the, as yet unknown, effect on consumer confidence of this week's Comprehensive Spending Review."
© Press Association 2010