After weeks and weeks of scouring the ‘net, you’ve finally found the car of your dreams. The right make, model and year, it even has all of the equipment you want! There’s just one problem. You need to finance the purchase and a private party is selling the car. Happily, while most lenders prefer working with dealers, many are willing to write a private car loan—if everything lines up properly.
Here’s how to get a loan for a private party car sale.
Before you begin shopping, talk to your bank, credit union or online lender to get pre-approved for a private car loan. That way, you’ll know exactly how much you qualify for, you’ll know exactly how much your payment will be—and most importantly, you’ll know how much you can really afford to offer the seller for the car.
Keep in mind you’ll have taxes, registration and insurance to pay as well. These items (aside from insurance) are automatically included when you buy from a dealer, but you’ll address them separately at the DMV when you buy from a private party.
Conduct research to find an accurate market valuation of the car. Lenders will have a good idea of the car’s value and won’t loan more than it’s worth. Still, you should have a good idea of the value of the car for your negotiations with the seller. You should also order a vehicle history report to make sure the car hasn’t been subjected to a crash and to get an idea of its maintenance history.
Check with the DMV to confirm the seller holds clean title. Lenders usually won’t finance a car with a salvage title. Further, if there are any liens, the owner won’t be entitled to sell until they are satisfied. Loans on the car will also have to be paid off before title transfer can take place. In most cases, your lender will pay their lender and the balance (if any) will go to the seller.
Remember, private party sales are almost always as-is. This means whatever problems the car has will become your problems. Go over it very carefully before you proceed with the deal. Take the car for a thorough test drive to make sure it drives well and you like the way it feels. Given you’ll have to make the payments on the loan regardless of the condition of the car, you should also get a pre-purchase inspection by a qualified mechanic before you make an offer to buy.
Do the Deal
If everything checks out, settle on a price and go back to your lender to request the funds to complete the purchase. If you’ve followed all of the steps above this will be a pretty simple process.
Have the seller accompany you to the DMV to complete the bill of sale. There, you will also pay to register the car and pay the sales tax on the transaction. Your lender will be listed as the lienholder and the title should be mailed to whatever address they designate.
Keep in mind different states have different processes in this regard. To be on the safe side, check with your state’s Department of Motor Vehicles about the procedures your state requires when buying a car.
As you can see, doing everything on your own means quite a bit more legwork on your part. However, you can generally get a much better price when you buy from a private party. Plus, the deal can be that much sweeter when you know how to get a loan for a private party car sale.