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Car Finance For Private Sales

Written by, Marija Petkova

Updated July, 19, 2023

If you’re looking to purchase a car, you might find one that suits your needs in a private sale.

But, can you get car finance for private sales? How does that work and what do lenders look for? 

Let’s find out.

Buying a Car Privately vs. Through a Dealership

The main advantage of purchasing a vehicle from a private seller, rather than a dealership, is that you can find the same or similar car for a much lower price

Private sellers do not have any overhead costs and are also more likely to be willing to negotiate, which means you might end up getting a better deal than what you were hoping for initially. 

However, if you buy a car from a dealer, you’ll have somewhere to turn to if there is an issue with the car, which is rarely the case with a private seller.

Can You Get Car Finance For a Private Sale?

The short answer is yes.

Certain lenders will consider offering car finance for a vehicle from a private seller, but there are some additional factors involved.

Since private sellers don’t provide the same assurance as dealerships, the application process will be longer and more complex. 

To approve finance for a private car sale, the lender will ask for additional documentation and information about the car and the seller and they might condition the financial transactions to ensure it’s secure. 

How Does Car Finance For Private Sales Work?

There are three main ways to finance a car from a private seller:

  • HP (Hire purchase): HP finance allows you to spread the monthly payments over 2-5 years with a fixed interest rate and fixed instalments. You can use the car as much as you want to and claim ownership at the end of the term. 
  • PCP (Personal contract purchase): PCP is a bit like a hire purchase but it’s cheaper since you don’t pay off the full value of the vehicle. It also allows you to spread the monthly payments over a longer period but comes with mileage limits. At the end of the term, you can decide whether to buy the vehicle outright by paying off the remaining amount in a balloon payment or use the equity you have in the deal to finance another vehicle.
  • Personal loan: If you’re not looking to buy a car on finance, you can get a personal loan. This type of loan is unsecured, meaning you won’t have to use the car as a security, but the lender might still take the car as part of any debt. 

Worth noting: There is a slight difference between car financing for a private seller on finance and with a personal loan. 

Car finance requires paying a deposit at the start of the contract and unlike with most loans, you don’t own the car while you make payments for a car finance agreement on a private sale – you’ll only be able to claim full ownership once you pay back what you owe. You could also swap it for a different model or return it, depending on the type of agreement you have. 

Tips On Getting Car Finance For A Private Sale

Here’s what you need to keep in mind when considering financing a vehicle for a private car sale.

Check your eligibility

You can use an online calculator to determine whether you’re eligible to buy a car on finance based on your credit score and credit history. This will also help you decide whether you’re a better candidate for a car loan or a car finance deal. 

If you opt for a loan, you might be able to reduce the interest rate of your monthly payments by getting a car loan with a guarantor.

Conduct pre-purchase checks

Purchasing a car from a private seller comes with certain risks. Since you’re not provided with the same kind of cover when you purchase a vehicle from a dealership, it’s best to ask a mechanic or a car specialist to check the car for any potential issues

You can also ask them to estimate the value of the vehicle to avoid being overcharged and do an HPI check to ensure that the car isn’t up for any hire purchase agreements.

Check the car’s age limit

While most lenders offer car finance deals for vehicles from private sellers, they usually have limits regarding the car’s age and mileage. Some only finance cars that are no older than five years, while others might accept cars that are up to 12 years old. 

Compare interest rates

Before you opt for a longer loan term, check the interest rate. Longer terms usually come with lower monthly premiums and higher APR rates. In 2020, the interest rate on an average personal loan of £5,000 was 7.6%.

Compare deals

Buying a car on finance might work out to be cheaper if you have a bad credit score. However, a good credit score and a regular income will likely give you access to better loan rates, in which case you’ll be better off with a personal loan. 

What Does The Seller Need To Provide?

Before making the purchase, the seller must provide the following details:

To get private finance for a car sale, you’ll need proof that the vehicle is safe and that it hasn’t been stolen or written off. 

The seller should also provide a full-service history, including details about the car’s age and mileage, and documentation confirming that the car doesn’t have any outstanding debt (you could also confirm this with an HPI check).

Bottom Line

If you’re looking to buy a car from a private seller, but you can’t afford to pay the full amount at once, then you can opt for a personal loan or a car finance deal. The application process would require more documents (and will likely take longer) since private sellers don’t offer the same security as dealerships, but you still get a great deal. 

Frequently Asked Questions And Their Answers

How do you finance a private sale car?

When you’re purchasing a car from a private sale, you can either choose to finance it with a personal loan or a car finance deal (PHP and HP).

What credit score do you need to buy a used car?

A good credit score to buy a car is anywhere between 881–960 for Experian and 531–670 and 604-627 for Equifax and TransUnion.

Where to get a car loan for a private sale?

You can get car finance for private sales from specialised lenders. If you’re looking for a car loan, you can find good deals at banks and credit unions. 

My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.