Private sale car loans help you buy a car from a private individual when you cannot pay the purchase price upfront. If the dealer’s car differs from what you want, you can broaden your search with the best car loans in Australia. This car loan can also save money as individuals can sell the same car for less than the dealer. Below is everything you must know about a car loan for a private sale.
Can you apply for a car loan for a private sale?
A big yes! Many people prefer to purchase a car through a private sale. Private sales give buyers room to negotiate. Negotiating discounts with dealers is much more difficult as there is a lot of overhead to cover costs such as rent, employee salaries, franchise fees, and many more. These fees do not apply to private sellers. Sellers may be willing to sacrifice a little on the price of a car to close a sale as quickly as possible, but dealers are generally not willing to discount beyond what the industry considers a “store.”
Financially, buying privately or through a dealer is very similar. In some cases, the lender’s income and your overall profile requirements are the same. However, you may need to sign more documents when closing the deal for a privately sold auto asset finance loan. Some lenders may calculate a private sale interest rate depending on the car’s age. Some lenders view cars as a higher risk because they do not come with warranties or certain protections that come with dealer sales.
How do private sale car loans work?
If the seller has yet to repay the loan for the vehicle for sale, the lender will first send the seller’s lender enough money to pay off the loan. This critical step allows the seller’s lender to waive the vehicle’s lien and purchase it with a clean title. The lender then transfers the remaining amount to the seller. Until you repay the loan, your lender becomes the new lien holder on vehicle ownership.
Similar to financing a dealership vehicle, you can tailor the loan repayment terms to suit you. Terms are available from 1 year (12 months) to 7 years (84 months). Some lenders may only offer some of these terms. However, if you only want a 12-month loan and the shortest term you have found is 36 months, you can always pay off the loan early. However, check the terms of the loan to ensure there is no prepayment penalty, which is a fee for paying off the loan early.
Loan Procedures for the best car loans in Australia for a private sale
Buying with cash is a relatively straightforward process. Give the seller a cheque or cash. However, there are third parties involved in this financing.
- Usually, the first step is to get pre-approval for an auto loan from a loan officer. It will help you keep track of your budget. If you found the car first, you can later arrange to finance and explain that you found the car you wanted. Please provide all vehicle details when applying for a loan.
- The second step is to pay the fee. It is done either by the lender transferring the amount directly to the seller’s bank account or by paying it himself on the condition that this amount is paid to the seller within a certain number of days.
After that, it is the same as any other car sale. However, for the auto loan product itself, we discuss some considerations further below.
Considerations to Make
Other than making sure the wheels do not fall off as soon as you get out of the driveway, there are a few things to consider when taking out an asset finance loan for a used car.
1. Car age limit
Many lenders have age limits for the cars they want to finance. It can be five years old, seven years old or up to 12 years old. If your car is a classic, many mainstream lenders will likely decline this, however there are plenty of investors who specialize in classic cars.
2. Rate of Interest
Lenders prefer funding loans for new cars more than used ones. It is due to two critical factors: used cars are considered riskier to finance than new cars, and loans are usually small because used cars are often much cheaper.
It does not mean you have to pay a higher interest rate to make a small loan worthwhile to the lender. The financial market has multiple products to offer, making the interest rates of used car loans competitive with new car loans.
Additionally, you may have noticed that lenders have two classes of used car loans: auto loans under a certain age (say it is six years old) and another group of cars over six years old. Some lenders may refer to their product as an “auto loan,” but it is an unsecured personal loan.
As with any loan, the same general rules apply when buying a used car loan. Review the pros and cons of the asset finance loan. These include loan terms, comparative interest rates, balloon payments, and other fees. Perform all regular automatic checks. Do more than just look at the credits. Like any other car, be very careful when checking your vehicle, even if it is written off or stolen. You can check it out on the PPSR website. If required, you can get the car checked by a professional mechanic.
So, you can get a car loan for a private sale. Many lenders and financial institutes help people in buying cars from private sellers. Expand your research to national, regional, and local lenders to get the best car loans in Australia. These days, private-party vehicle loans are inexpensive, with their interest rates competing with new vehicle financing.