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Compare private party auto loans

You might save on the sticker price, but be sure if it's worth the higher rates.

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By

Anna Serio

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Getting a loan for a private car sale works a little differently than when you buy used or new from a dealership. While you might get a better deal on the price of the car, private party auto loans tend to come with higher rates and may require stronger personal credit.

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Name Product Filter Values Minimum credit score APR Loan term Requirements
LightStream Auto Loans
LightStream Auto Loans
Good to excellent credit
Competitive
2 to 7 years
Must have a good to excellent credit profile, be a US citizen or a permanent resident with a valid green card, have a valid Social Security number, credit card verification requested upon loan approval and have a valid US address.
Quick car loans from $5,000 to $100,000 with competitive rates for borrowers with strong credit.
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More Info
CarGurus
CarGurus
Varies
Varies depending on the lender
3 to 6 years
Varies depending on the lender
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CarsDirect auto loans
CarsDirect auto loans
No minimum credit score
Varies by network lender
Must provide proof of income, proof of residence, and proof of insurance.
Save time and effort with this lending service specializing in beginner-friendly or subprime car loan.
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Carvana
Carvana
No minimum credit score
3.9% to 27.9%
1 to 6 years
18+ years old, annual income of $4,000+, no active bankruptcies
Get pre-qualified for used car financing and receive competitive, personalized rates.
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What is a private party auto loan?

A private party auto loan is when you borrow from a lender to purchase a car from a private seller rather than a dealership. You’ll need to have a specific vehicle picked out to apply. Your lender will then pay the seller directly, and you’ll be responsible for repayments — which will work the same as any car loan.

Keep in mind that you may face higher interest rates and it may take longer to process, especially if the current owner still owes money to a bank or other lender.

Where can I get a private party auto loan?

You can borrow from online lenders, banks and credit unions — but not every lender offers loans for private purchases.

Online lenders

You’re most likely to find private party auto loans through online lenders. To get started, you can work with a direct lender like LightStream or use a comparison service like LendingTree — or browse our table of lenders to see which offers a good deal on your private party purchase.

Banks

Some banks — like Chase, Wells Fargo and Capital One — don’t offer loans for private purchases. However, you can still find good deals from other banks, including:

LenderAPR
Bank of AmericaStarting at 5.69%Read review
PNC Bank6.59% to 8.69%Read review
SunTrust via LightStreamCompetitiveRead review
USAAStarting at 2.79%Read review

Rates checked on September 28, 2020

5 steps to get a private party auto loan

Follow these steps to secure financing for a private purchase:

  1. Find your car. You need to know what car you’re going to buy before you apply for a loan, including the model, make, year, mileage and purchase price.
  2. Compare lenders. Start by finding a lender you’re eligible with before comparing APRs, terms and fees. Some lenders offer preapproval, which allows you to compare the rates and terms you might qualify for before filling out the full application.
  3. Apply for financing. Most lenders have an online application, though banks and credit unions might require an in-person visit. With an online lender, you could have funds sent to the seller in as little as one day, while banks may take longer to process your application.
  4. Fill out the paperwork. At this point, the seller has to sign the title over to you and complete the bill of sale. You can typically drive away in your car as long as the title is transferred over to your name.
  5. Register the title transfer and your car. Once you’ve signed the paperwork, you’ll have to visit your local DMV to register the title transfer and your new car. You should also be prepared to pay fees and taxes on your purchase.

Pros and cons

Though you can often nab a lower sticker price by buying a used car through a private seller, you may get stuck with less competitive rates and terms on your loan.

Pros

  • Potentially less expensive overall. The savings in private party financing come in the loan amount, rather than interest. Private party sellers often offer cars at a lower price than dealerships.
  • More room to negotiate. Private sellers aren’t known to be excellent negotiators. And if they just want to get the car off their hands, they might sell it for lower than the asking price.
  • No add-ons. Dealerships sometimes sneak in add-ons you don’t need to inflate the price of your car. This rarely happens with a private party purchase.

Con

  • Higher rates. Private sale car loans tend to come with higher rates than other used car loans.
  • More paperwork. You have to handle the bill of sale, title and registration transfer and other paperwork that a dealership normally handles for you.
  • Less protections. You typically won’t get a warranty when you buy a car outside the dealership. And many state laws that protect buyers from faulty cars don’t apply to private party purchases.

What do I need to get a private party auto loan?

Each lender has different eligibility requirements, though you typically must meet a few basic criteria to qualify.

  • Good to excellent credit
  • Regular source of income
  • Low debt-to-income ratio
  • Vehicle ready to purchase

Many lenders also have restrictions on the age and mileage of the car you’re looking to purchase. In general, the older the car, the more expensive the loan.

Can I get a private seller auto loan with bad credit?

Because lenders often consider buying a car from a private seller riskier than going through a dealership, finding a private party auto loan with bad credit can be tricky — it’s a double risk. You might have better luck using an online connection service, though make sure you’re not working with one that specializes in dealership financing.

You also might want to save for a down payment, since it’s typically easier to get approved for smaller loan amounts. And like with other loans meant for people with bad credit, you’ll probably end up with a higher interest rate.

6 tips for buying a used car from a private seller

Keep these pointers in mind when buying a used car from a private party:

  1. Check the vehicle’s history. Run a check on the VIN, or vehicle identification number, to make sure the car isn’t stolen and hasn’t been salvaged.
  2. Verify the seller’s identity. Ask to see state-issued ID to make sure you’re buying a vehicle from the person on the car’s title.
  3. Have your mechanic look at it. Mechanics tend to favor the person they’re working with — you might get a more honest assessment if you use your own, rather than the seller’s.
  4. Give it a spin. Test driving your vehicle is the only way to tell if it’s right for you and can help you spot potential problems.
  5. See the title before you buy. It’s a red flag if the seller can’t produce the title up front or won’t show you it before you sign the bill of sale.
  6. Double-check all DMV paperwork. Nobody likes going to the DMV, and the last thing you want to do is go back or stay longer if your paperwork is sloppy or incomplete.

Bottom line

Getting a car loan for a private party vehicle can be more expensive and take more time than financing a car from a dealership. But the potential savings on the actual price of the car might just make it worth it. Not all lenders will finance private party purchases, however, so compare your car loan options before negotiating with a seller.

Frequently asked questions

How do I pay the private seller with an auto loan?

In most cases, the lender sends the funds directly to the private seller so you don’t have to receive the money and pay for the car yourself. If you take out a personal loan, the funds are transferred to your personal account and you can choose how to pay off the seller.

What length of a loan term can I qualify for?

In most cases, a lender will offer you a term between 24 and 60 months. Although there are 72- and 84-month terms, these are usually reserved for new car purchases.

What if the seller has an outstanding loan on the car?

If your seller hasn’t completely paid off the car loan, you’ll have to get their lender to release the title to your name. This can take a couple of weeks or longer. In some cases, the seller might be able to pay off the loan up front. But if they can’t, your lender might need to work with the seller’s lender to make sure both loans are paid off.

Read our guide on buying a used car with an outstanding loan to learn more.

Picture: Shutterstock

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