How Private Party Auto Loans Work
PRIVATE PARTY CAR LOANS
A person-to-person auto loan is when you buy your vehicle from a private party, not a dealership. This type of financing has some of the same characteristics as loans for dealership purchases. However, there are also some key differences.
Loan terms
Private party auto loan terms tend to be less than buying a new car from a dealership. New auto loans are typically offered for as long as 72 months. On the contrary, the maximum available loan term for private party auto financing is usually 48 months.
**Please note that the longer you finance your vehicle for, the more money you are going to pay in interest over the entire life of the loan. Therefore, try and finance for as short a time as possible.
Interest rates
The interest rates associated with person-to-person car loans are usually higher than new or used car purchases from dealerships. It is very common for interest rates to be as much as 2% higher than new car dealer purchases and 1% for used cars. What interest rates you receive will ultimately depend on your credit rating and history.
**It is recommended that you obtain a copy of your credit report before applying for any type of auto financing. You need to make certain that all of your information is 100% accurate and current.
Down payments
Most auto loan providers will not require any sort of down payment when applying for a loan for either a dealership or private party purchase. However, a good rule of thumb is to try and put down no less than 20% to avoid becoming upside-down on your auto loan. Meaning, you wind up owing more than the car is worth.
Taxes, title and registration
The fees associated with taxes, title and registration can be combined into the final loan amount when buying from a dealer. However, these fees can not be combined into your person-to-person loan. You will have to pay these fees out of pocket.
Name on title
When you buy a car from a dealer, your name is put on the title the instant you sign the papers and make the deal official. However, when buying a car from a private seller, it can take as long as two weeks for your name to be placed on the title of your car. This happens because it sometimes takes the sellers lender some time before they fully complete the payoff process.
In conclusion, it is important to understand how private party car loans work. When you buy a car from a friend, family member or even a stranger, it is likely you will get a good deal. However, as mentioned, interest rates associated with private party auto loans are higher. This means that you may end up paying more for the vehicle as a result.
Jacob Joseph is a financial expert for http://www.starloanservices.com. At Star Loan Services you can get a free, instant quote for a
bad credit auto loan.
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