Can I get a car loan for a private sale if the vehicle is already under finance?

Yes, it's generally still possible. Your lender will pay the seller’s lender to cover the existing finance and any remaining funds will go to the seller.

Are there other finance options for a private sale car purchase?

Yes. Options include novated leases, car loans with balloon payments, or ABN car loans for business owners.

Compare Private Sale Car Loan Rates

Can I get a car loan for a private sale?

Yes, most lenders in Australia offer car loans for vehicles being bought through a private sale. This means you can buy a car privately using finance and use the vehicle as security for your loan.

In most cases, a private sale car loan is the same as any other kind of car finance. But lenders generally require more information and checks to be carried out when lending for a private sale. This is simply because there is usually greater risk and uncertainty involved compared to a loan for a dealer sale.

Buying a car through a private sale is pretty common in Australia. In fact, around 28% of all car loan requests through Money.com.au are for a private sale vehicle (the remainder are sales through a dealership or buying brand new).

Our data shows:

The average private sale car loan amount requested is $24,230

The median age of the private sale vehicle being financed is 9 years

Five years is by far the most common loan term selected

Step 1: Compare private sale car loans

When comparing private sale car loans, look at the interest rate, fees charged and the loan features (particularly ones that will help you pay off the loan early). You can use our car loan calculator to work out how much each loan you compare will cost overall.

While most lenders in Australia will offer private sale car finance, double check this before submitting an application. Some lenders may have stricter criteria (e.g. for the car’s age) for private sale car loans.

If you’re unsure where to start, a car loan broker can help you find the most suitable finance for your situation. Brokers are experts at asking questions to identify your needs and goals, and can guide you through the different loan options available.

Step 2: Apply for pre-approval

Once you decide on the most suitable private sale car loan, apply for pre-approval. This will mean you know at an early stage how much a lender is prepared to lend to you. The lender will ask you to provide documents to support your application (pay slips, bank statements etc.).

With pre-approval secured, you can approach private car sellers confident in your budget. Getting car loan pre-approval can also mean a faster sale once you have found the car you want.

Step 3: Find a car to buy

Be sure to use a reputable website or app when searching for private sale cars. You should be able to filter cars based on your pre-approved private sale car loan amount. To protect yourself, pay attention to the consumer protections for buyers in a private car sale. The protections vary by state and territory as follows:

Step 4: Complete checks on the car

We'll explain more on this below, but to summarise, it's important to check that the car:

is not stolen;

is not a write-off;

does not have a security interest registered against it (i.e. is not already being used as security on another loan).

A Personal Property Securities Register (PPSR) check will provide this information. In addition, you should check that the car is mechanically sound.

These checks will not only help make sure that the car you’re buying is fit for purpose, but could also help avoid a loan rejection if the lender discovers an issue with the car.

Step 5: Give details about the car to the lender

Before giving full approval on a secured car loan for a private sale, the lender will want to know about the car you're buying. This will include information about the type of vehicle it is, its age and model.

The lender will also typically seek verification of the vehicle seller’s identity, that they are the registered owner for the vehicle (registration certificate) and will ask to see photos of the vehicle.

Lenders usually use a tool such as Verimoto to perform these checks. As a final step, the lender will ask for proof that you have taken out a comprehensive car insurance policy to cover the car. A lower level of third party car insurance generally will not be enough, as it may not cover the value of your car if there is an accident.

Step 6: Complete the purchase

If the lender is happy, it will approve your private sale car loan and transfer the money to the private seller. In the case of an unsecured loan, the lender will simply transfer the loan funds to you so you can complete the purchase.

Finding the best private sale car loans

Money's asset finance expert, Phil Collard

Phil Collard, Money.com.au's Car Loans Expert

"Don’t limit yourself to lenders specifically advertising ‘private sale car loans’. Chances are if the car you’re buying privately is in good condition and not too old, any lender offering car loans will consider you for finance. This means you can keep your options open and give yourself the best chance possible of securing a good deal."

Phil Collard, Money.com.au's Car Loans Expert

What are the interest rates on private sale car loans?

Interest rates on private sale car loans in Australia generally start from around 6.00% - 8.00% p.a. This is similar to other types of used car loans.

Just bear in mind that some lenders view car loans for private sales as being riskier. If this is the case, a higher interest rate could apply. Lenders will also consider factors like your credit record, income, employment history and living situation when setting the interest rate on your private sale car loan.

The age of the car is also a factor. Analysis by Money.com.au found that the median age of cars bought through a private sale (9 years) are older than those purchased through a dealer (5 years). Older cars typically attract higher rates.

It’s generally still possible to get a private sale car loan if the vehicle you’re buying has an existing loan on it.

A vehicle with finance owing on it is ‘encumbered’, to use the industry jargon. If this is the case, your lender will pay your loan funds to the seller’s lender to cover the remaining balance.

Here’s how that process would work:

1

The seller of the vehicle will need to request a payout letter from their finance company and have this sent directly to you.

2

Your lender will settle the remaining balance by paying the amount specified in the payout letter directly to the seller’s finance company. In car finance-speak, the vehicle is no longer encumbered.

3

If the car’s sale price is more than the seller’s loan balance, your lender will pay the difference directly to the seller.

4

Never pay the seller the full sale amount directly if the vehicle is still under finance. If the seller decides to not repay their loan, the car you have purchased may be repossessed to cover the debt.

Buying a vehicle through a private sale can save you money. Money.com.au data shows borrowers request smaller loans for private sales (albeit the average car age is higher).

But a private sale is very different to getting a car from a certified dealer. For example:

You don't have the same consumer protections.

This means you are responsible for all checks on the vehicle.

Once you purchase the car privately, you assume full responsibility.

You cannot take the car back after buying it.

Unfortunately, some people selling cars privately do so with the aim of ripping off buyers.

For example, the vehicle might have undisclosed mechanical problems, be a repaired write-off or still be under finance without you knowing.

Other sellers may simply be unaware of issues with their vehicle. Either way, it’s important to protect yourself at all stages when buying a car privately.

First, get a professional, independent mechanic to inspect the vehicle. Make sure they look for evidence of any dodgy crash repairs. Second, apply for a CarHistory report. This is an easy-to-understand vehicle report you can get for $39.95 online. You could apply for and view the report on your phone there and then while you are inspecting the vehicle. The report will include:

A PPSR (Personal Property Securities Register) Certificate indicating any existing finance on the vehicle

Details if the vehicle has suffered damage resulting in a written-off status

The vehicle’s odometer history

Previous sale listings for the vehicle

Vehicle safety and emission ratings

An estimation of the vehicle’s value on the market

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FAQs about private sale car loans

Will a bank give a loan for a private sale?

Most lenders, including the banks, will offer loans to borrowers buying a car from a private seller. Of course, they will need to check that the vehicle you’re buying is suitable to be used as security if you’re applying for a secured car loan. They’ll also assess your ability to repay the loan based on your income and other expenses.

Are there other finance opinions for a private sale car purchase?

A common alternative to getting a car loan to buy a vehicle is a novated lease. With a novated lease your car finance repayments are made to the finance company by your employer from your pre-tax salary.

Novated leases can typically be used for new or used cars, but not all employers offer this arrangement.

Another option to consider is whether to get finance with or without a balloon payment.

A car loan with balloon payment reduces your regular repayments but you will need to make a large one-off repayment at the end of the loan term in order to own the vehicle.

If you are a business owner looking to buy privately, you could consider finance through a specialist ABN car loan.

How do I pay for a private car sale?

To pay for a car through a private sale, either your lender will transfer your loan funds directly to the seller based on your instructions, or the loan funds will be paid to you for you to make the payment to the seller.

It's important to take care when making the payment for a car bought through a private sale as you do not have the same consumer protections as you do when buying from a dealer.

What do I do if the private seller asks for a deposit?

Be careful here. In some situations, the seller of the vehicle might ask you to pay a deposit while you’re waiting to get approved for finance. Having pre-approval on your finance can be a big help here.

If you do pay a deposit and something goes wrong, there may not be much you can do if the seller won’t give you your money back. The advice from CarHistory is to ensure that any conditions on the deposit are made clear in writing. For example, under what circumstances will the deposit be returned or not?

The best thing to do in this situation may be to seek advice from your lender. Or if you’re really not sure, get legal advice.

How much should I pay for a private sale car?

There is no ‘one size fits all’ answer to the question of how much you should pay if you buy a car privately.

If you have requested a CarHistory report, the estimated value of the vehicle will be included in the report.

Another good vehicle price-estimation resource is RedBook. Its pricing is for standard vehicles in average condition for their age and with average kilometres travelled.

Also take into consideration factors like modifications, mileage, what the car was used for, and its overall condition when comparing it with other listings.

Will it be more difficult to get finance if I have bad credit?

Getting finance for a private car purchase won't necessarily be harder if you have bad credit, but it may be more expensive. Lenders who offer bad credit car loans typically charge higher rates because of the extra risk involved.

A private sale can also be viewed as more risky by lenders, compared to dealer sales. This could also push your interest rate higher.

Important Disclosures

^Comparison rate warning

Unless otherwise stated, personal loan comparison rates are calculated based on a loan amount of $30,000 repaid over a 5-year term. The comparison rates only apply to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees and cost savings such as fee waivers are not included in the comparison rate but may influence the cost of the loan. Check with the provider for full loan details, including rates, fees, eligibility and terms and conditions to make sure the product is right for you.

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General information only The information on this page is general in nature and has been prepared without considering your objectives, financial situation or needs. You should consider whether the information provided and the nature of any car loan product is suitable for you and seek independent financial advice if necessary.

We are not providing you with a recommendation or suggestion about a particular car loan. You should read the relevant disclosure statements or other offer documents before deciding whether to apply for or continue to use a particular product.

What products, features and information are shown While we make every effort to ensure all car loans available in Australia are shown in our comparison tables, we do not guarantee that all products are included. Our product comparisons may not compare all car loan features and attributes relevant to you.

Product information, such as interest rates, fees and charges, is subject to change without notice. We include a link to each provider on our table for you to also be able to see the relevant product information direct with the lender.

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