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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.
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.
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.
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.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
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:
|Bank of America||Starting at 5.69%||Read review|
|PNC Bank||6.59% to 8.69%||Read review|
|SunTrust via LightStream||4.99% to 10.49%||Read review|
|USAA||Starting 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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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:
- Check the vehicle’s history. Run a check on the vehicle identification number (VIN) to make sure the car isn’t stolen and hasn’t been salvaged.
- 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.
- 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.
- 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.
- 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.
- 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.
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.
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