Private Party Car Loans
A private party car loan is used to buy a vehicle from either an individual seller or from a dealership. This type of loan is sought by a used car buyer independent of the dealership. A private party loan is similar to a traditional auto loan you would get through a dealership but there are some differences.
Length Of The Loan
Private party lenders tend to offer shorter loan terms compared to dealership loans. Dealership loans are often as long as 72 months or 6 years. On the other hand private party loans are typically 36-48 months or 3-4 years.
Remember that the longer the loan term the more interest you end up paying over the course of the loan. Therefore, if you can afford to make higher monthly payments on a shorter loan term you will get the best deal.
Higher APR
On average interest rates are higher on private party loans compared to dealership loans. This may be misleading because private party loans accept people with lower credit scores but charge higher interest rates. If you have good credit you can usually find a rate that is comparable to what you could get through a dealer.
Loan Approval Prior To Purchase
At a dealership sales people will often get you interested in a particular vehicle assuring you that the financing will be no problem. Sometimes it is. With private party auto loans the financing is setup beforehand so you can go into the dealership with your money in hand which puts you in an excellent negotiating position.
Another advantage to this setup is that buyers with less than perfect credit can find out exactly how much car they can afford before they decide on one. It sucks to find the perfect vehicle and be told after doing all the paperwork that they cannot actually afford it.
Private Sellers
Dealers have a lot of overhead, and those costs are passed down to the consumer whether you buy a used car or a new car. Unlike dealership loans where you can only buy from the dealer, private party loans can be arranged for person-to-person transactions as well. If you can get a great deal from a friend or Ebay then a private party auto loan might be exactly what you are looking for.