Not all lenders will allow you to purchase your vehicle from a private seller when you have a secured car loan approved. The lenders that will accept purchases from private sellers require some additional information to prevent fraudulent activity as opposed to a purchase through a licenced motor dealer, where the lender has some safeguard as to the seller they are dealing with.
Top 5 benefits of a private sale car loan
- Fast approvals
- Low rates and flexible terms
- Independent Advice
- Wide range of lenders and products
- Fixed repayments make budgeting easy
The reasons for this are that licenced motor dealers have conditions they have to adhere to in order to have a licence, which allows them to stay in business, and due to them being a business, if something is not right, the lender will have an easier time contacting a dealer than a private seller.
Unlike unsecured personal loans, where the lender advances you the funds to use them the way you wish, with a secured car loan, the lender has to ensure they are getting the funds to the rightful owner of the vehicle you are purchasing, and they want to make sure that the vehicle is the correct vehicle as per the registration certificate, as they are using that vehicle as the security over the loan.
Due to this, the lenders that allow private sales to be used as security under a car loan require additional information from the seller of the vehicle. They will request the following items:-
- Seller’s Driver’s Licence
- Registration Certificate
- Proof of Seller’s Bank Account Details
- Independent Vehicle Inspection
- Some lenders require photos of the car
- A signed Private Sale Invoice as an agreed price between seller and buyer
- A Payout letter from the financier if there is current finance owing on the vehicle
The Driver’s Licence, Registration Certificate and Bank Account details will all have to be in the same name. This gives comfort to the lender that the seller is the rightful owner and that the funds for the car get forwarded to the correct person’s account. The signature on the Driver’s Licence and Private Sale Invoice should also match.
The Independent Inspection can be done by a number of different companies, such as Marshalls Batteries, RACV, RACQ, RAA, or the equivalent in your state, or if your broker is local to the car being purchased, they may have the ability to do so. Some lenders will allow Roadworthy Certificates if your State requires them for registration.
A comprehensive report is also done, usually by your broker or lender, and this will show if the car has been reported as a stolen vehicle, or has been classed as a write-off. This report will also display all the correct identifiers, such as Vin/Chassis Number, Engine Number and Registration State and Plate details and will also show if there are any encumbrances (outstanding money owing) to any other financiers.
These conditions not only protect the lender, but also protect you as a buyer. It does sound like a lot more work, but it is not really that much more difficult, especially as your broker should take care of this directly with the seller for you. It does allow you more flexibility and choice though when you are purchasing your new car and can often save you substantially than buying through a dealership.
The approval process is generally the same, but if the seller is known to the lender for any negative reason, they may not allow you to purchase the vehicle from that particular seller, but this is a very rare case that this happens.
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