Difference between "needed" and "necessary"

1. The spelling:

Needed
Necessary

2. Part of speech:

Needed: past participle form of verb need; sometimes uses substantively as a noun.
Necessary: an adjective.

3. Necessary is the idiomatic choice--13 times more common than needed in the OP expression:

4. Oxford Dictionaries Online recommends necessary in lieu of needed.

The word "needed" sees most of its use as the past tense of the verb "to need". Due to its repeated glottal stops, it has the tendency to appear clumsy when employed as an adjective, which is why the word "necessary" has become so common. Compare the frequency with which one encounters the word "desired", as opposed to "desiderated".