If you’re looking to finance a car bought from a private seller, there are a few things you need to be aware of before you get started. Otherwise you could find yourself being offered an unsecured loan with a much higher interest rate than you could be paying, or you might be told you can’t finance the vehicle at all.
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.
The lenders that will allow you to have a secured loan 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.
The information required to establish that the vendor selling the vehicle is the correct person varies a little from lender to lender. But could 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. Most lenders that provide secured car loans on private sales won’t issue a bank cheque but instead use a direct deposit to ensure that the funds are being used to purchase the vehicle and not for any other purpose.
The lending criteria is generally the same as if the vehicle is being purchased through a dealer, some lenders increase the interest rate very marginally for private sale secured car loans but not all lenders will, so it is always a good idea to find someone that understands the differences between lenders and has access to a panel of lenders to ensure you can get the best deal for yourself.
Some feel it all sounds a bit too much, but usually the broker can deal with the vendor directly and the purchaser doesn’t need to do anything more than obtaining a dealer purchased secured car loan. At CarLoans.com.au, our brokers handle the entire private sale process, all you need to do is provide the sellers contact details and let them know you’ll be financing the car and to expect a call from your broker to arrange the required proof of ownership and inspection.
When you purchase a used vehicle from a dealership, depending on its age you will be provided with a 3 month statutory warranty that could help protect you if the vehicle your purchased turns out to be a lemon. You won’t have this same level of protection when you purchase a vehicle from a private seller, so it could be a good idea to consider some form of extended warranty protection if you’re concerned about your vehicles reliability.