Buying a car through a private sale is pretty common in Australia. Around 45% of all used car loan requests through Money.com.au are for a private sale vehicle (the remainder are sales through a dealersip).

Luckily, the process for applying for a private sale car loan is similar to other kinds of car loans. You should also have just as many loans and lenders to choose from. Here's how it works.

Step 1: Compare private sale car loans

• Virtually all Australian lenders will provide a secured car loan for a private sale if the car meets the age criteria. This is a loan where the car you're buying is used as collateral. In other words, the lender can reclaim the car and sell it if you can't repay the loan. When comparing options, 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 a car loan calculator to work out how much each loan you compare will cost overall.

Step 2: Apply for pre-approval

• Once you decide on the most suitable car loan, apply for pre-approval. This will mean you know how much a lender is prepared to give 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 a 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. These vary by state/territory:

• ACT
• New South Wales
• Northern Territory
• Queensland
• South Australia
• Tasmania
• Victoria
• Western Australia

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 mechanically sound;
• is not stolen;
• does not have money owing on it;
• is not a write-off.

Step 5: Give details about the car to the lender

• Before giving full approval on a secured private sale car loan, 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. They will also ask to see a registration certificate for the vehicle (provided by the seller).

Step 6: Complete the purchase

• If the lender is happy, it will approve your 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.

BONUS STEP: Before applying for car finance for a private sale, do a quick credit score check. This if free to do and gives you an idea of whether you're in a good position to be approved.

Interest rates on private sale car loans in Australia start from around 6-7%. This is similar to other types of 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.

The age of the car is also a factor. Analysis by Money.com.au found that, on average, cars bought through a private sale are older (9.8 years) than those purchase through a dealer (6.1 years). Older cars typically attract higher rates.

The table below gives an idea of how much the repayments would be on a private sale car loan based on different interest rates and loan amounts.

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 it's a private sale is very different to getting a car from a certified dealer.

Here’s why:

• 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 $37 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