Purchasing Cars from a Private Seller

Some banks and lenders may have restrictions when providing loans for cars, where they may leave you with the choice of having to either purchase your vehicle through a dealer to obtain the benefit of getting a reduced secured car loan interest rate, or if you found a car through a private seller, they may only give you the option of an unsecured loan, paying a higher interest rate.

The reason being is that the lender feels they have some level of protection using a car as security purchased through a dealership, as a dealer is a registered business and requires a Motor Dealers Licence to operate, minimising the risk of any fraudulent activities with vehicle purchases.

This doesn’t mean that all lenders will not allow you to obtain reduced secured car loans on vehicles being purchased through a private seller, but the lenders that do will require some information from the seller to prove they are the rightful person to be able to sell the vehicle and that the funds from the loan get disbursed correctly, paying out any existing finance on the vehicle and making sure the registered owner receives any surplus funds, or all of the funds if they own the car outright.

Most lenders that provide secured car loans on private sales won’t issue a bank cheque, as they want to make sure that the funds are being used to purchase the vehicle that has been sold and not used for any other purpose, as that vehicle is the security offered on the loan in order for you to obtain a secured car loan.

The lending criteria is generally the same as if the vehicle is being purchased through a dealer, some lenders load the interest rate very marginally for private sale secured car loans and the load is usually only about 0.5% if any, but not all lenders increase their rates for private sale car loans, so it is always a good idea to find someone that understands the differences between lenders to ensure you can get the best deal for yourself.

The additional information required to establish that the vendor selling the vehicle is the correct person which varies a little from lender to lender would include things such as the current registration certificate, the vendor’s drivers licence and proof of banking details where they want to funds deposited to, current financier payout letter, photos of the car, vehicle inspection report and a sale agreement between the vendor and the purchaser.

Some feel it all sounds a bit too much, but usually the broker can deal with the vendor direct and the purchaser doesn’t need to do anything more than obtaining a dealer purchased secured car loan other than the vehicle inspection report .

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