Using Car Finance To Buy A Used Car At Private Sale

Used Car Dealer

Many people will never buy a brand new car. This isn’t a bad thing at all, as buying a new car costs you thousands the moment you leave the car dealership.

You can get a great car that’s just one or two years old for a much better price. You can save even more if you purchase your used car in a private sale rather than from a dealership.

For example, the Chevrolet Malibu 2015 LT Sedan 4D is worth around $13,057 at a private sale if it’s in good condition, according to Kelly Blue Book*. At a dealership, you’ll pay $14,490 for a certified used car of this model. So while purchasing at private sale is a little riskier, it can pay off in savings.

Find Finance For A Private Sale Car

If you don’t have the savings to purchase a car outright, you can get car finance for a used car that’s less than 6 model years old.

You can either take out a secured car loan for a car that’s less than 6 model years old or opt for an unsecured loan to purchase any car of your choice, regardless of age.

Compare loans before you commit, starting with the banks or credit unions where you have current accounts. Then check online to see whether you can get a better rate.

Hurdles to private sale finance

Private auto loans can be a little stricter than loans for dealership cars, due to the slight risk involved in purchasing an uncertified car.

1. Your credit score

Usually, you’ll need to have good credit to finance a private sale car.

2. There are more checks to pass for approval

Some lenders may approve your loan based solely on your credit history and financial profile. Other lenders may require an approval from a private banker if you want to buy a car that’s 5 years old or older. Some may look into the vehicle collisions reports to find out if it’s a stable vehicle.

3. Rates can be slightly higher than for dealer cars

Rates on person to person auto loans are generally higher than those on a dealer to person loan. This is partly due to the slight risk of buying at private sale.

There’s no warranty on the car like there is from a dealership, so there’s more risk to the lender that the car you buy that will form security for the loan won’t hold the represented value. With all the right mechanical checks, you should still come out ahead with a private car purchase even factoring in a rate of around 0.7% more than a dealer person loan.

4. Paying out existing finance

If the current owner of the car purchased the vehicle under finance, you’ll need to complete the forms required to have your lender pay out the existing loan. It may take the owner’s bank a few days to process the paperwork.

5. Transferring title

Depending on the laws in your state, you’ll need to register the transfer of ownership by taking the bill of sale application and odometer statement to your DMV. This is another saving you make at private sale as a dealership typically charges a significant processing fee for this paperwork. When you register the car you’ll pay the local tax, title and registration fees too.

Private Sales Pay Off

Not having cash to purchase a car isn’t a barrier to buying at private sale. With a comprehensive mechanical check, you can get a great deal on a car, if you’re willing to put in a little extra effort to sort out the paperwork.

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