Private sale car loan

Buying a car privately is the most popular way to purchase a car in Australia. Because of this, private sale car loans are relatively simple. Depending on the age of the vehicle, you may qualify for a car loan from a variety of lenders. Typically, you can arrange finance in a couple of days.

Whether you’re looking for the lowest rate, the lowest repayments, or just a loan without unnecessary fees, taking a few minutes to compare your available options can save you time and potentially hundreds or thousands of dollars over the lifetime of your loan. You can do that simply by using our smart-form.

Buying a vehicle through a private sale means that you’ll be responsible for all checks on the vehicle before finalising the purchase. You do not have the same consumer protections as you would if you were buying through a car dealership. Once you purchase the car privately, you assume full responsibility; you cannot take back the car after purchasing it through private sale.

Here we’ll walk you through the steps — from finding a car to making a purchase.

First, you’ll want to find a vehicle to finance. In Australia, some of the most popular places to find private sale vehicles are online, including:

• Gumtree
  

• Facebook Marketplace
  

• Drive
  

• eBay
  

• CarSales.com.au
  

Once you’ve found a vehicle you’re interested in buying that fits your budget, you’ll need to make sure you protect yourself by conducting a PPSR check before applying for vehicle finance with a car loan lender.

Here are the three most important steps when using vehicle finance to buy a car at private sale:

• The buyer will need to conduct a PPSR (Personal Property Securities Register) check. This will reveal whether there is any finance owing on the vehicle. To do this, go here: https://www.ppsr.gov.au/how-quick-motor-vehicle-search
  

• If there is finance owing on the vehicle, the seller of the vehicle will need to arrange a payout letter from the finance company.
  

• If you are approved for finance on your private car sale purchase, the lender will pay the amount indicated in the payout letter first to the finance company, then release the remaining funds to the seller.
  

Statistically, the incidence of fraud is higher in private sale transactions than when buying from a licensed car dealer, as there are fewer consumer safeguards attached to the private sale process. To avoid fraudulent activity during your purchase, you’ll need to learn how to protect your own interests throughout the process.

Three common misrepresentations by private sellers are:

• The condition of the vehicle (mechanical)
  

• The finance status of the vehicle — i.e. encumbrance
  

• Its status as a repaired write-off
  

However, it’s simple to protect yourself as a buyer if you are comfortable investigating the vehicle thoroughly before committing any funds to its purchase. Your first step here is to engage a trusted, independent expert to inspect the vehicle and assess its mechanical condition and look for evidence of dodgy crash repairs.

Your next step is to investigate the vehicle against administrative benchmarks by applying for a CarHistory report. A CarHistory report is an easy-to-understand vehicle report and can be obtained for $37 online.

This vital, $37 report will include:

• A PPSR Certificate indicating any existing finance on the vehicle — i.e. encumbrance
  

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

• The vehicle’s odometer history to assess wind-back tampering
  

• Information relating to any previous write-offs or theft involving the vehicle
  

• Previous sale listings for the vehicle
  

• Vehicle safety and emission ratings
  

• An estimation of the vehicle’s value on the market
  

Buying a vehicle that is currently under finance

If a vehicle is still under finance from a previous loan agreement — referred to as ‘encumbrance’ — it will not be approved for vehicle finance. It’s still possible to buy a car that is currently used as the security over the seller’s existing loan, however it is essential to ensure that this pre-existing debt is repaid in full, so that the encumbrance is removed from the vehicle as part of the purchase process.

In this way, neither you nor your lender will be burdened by the previous owner’s loan security — i.e. the ‘encumbered’ vehicle. For this reason, if the car you intend to buy is subject to existing finance, you will need to supply your lender with a payout letter from the current lender.

Your lender will arrange to repay the existing debt in full, direct to the financier, thus discharging the encumbrance. The balance of funds owing — if any — will be separately transferred directly to the seller.

In this situation, never pay the seller the full sale amount directly. If the seller decides to not repay their loan, the car you have purchased may be repossessed to cover the debt — leaving you without a car, and a debt of your own to service.

Private sale car finance is often secured by the vehicle you purchase. Under this arrangement, the lender is entitled to take possession of the vehicle in the event of a default, with a view to selling it to recover any outstanding funds. This reduces risk to the lender — reduced risk equates to lower interest rates on a car loan.

As a condition of the loan, the lender might also require you to take out comprehensive insurance over the vehicle, and for the lender to be named on the policy.

In some situations, you may be asked by the seller of the vehicle to provide a security deposit on the vehicle before gaining approval for finance and completing the purchase of the car. You may then choose to adjust the finance amount you apply for to include this figure, or ask that it be deducted from the payment made to the vendor following the sale.

For example:

• You see a car advertised for private sale at $8,000
  

• You arrange to view the vehicle and conduct all necessary checks to ensure it is ideal for purchase and is not encumbered
  

• The seller requests a $500 deposit to secure the vehicle before sale and issues a receipt for this amount
  

• You then apply for private sale vehicle finance of $8,000 and supply the lender with proof of the deposit amount
  

• The lender pays out $7,500 to the seller, and you will repay the lender the $8,000 loan amount plus interest over the term of the vehicle finance agreement.
  

How much to 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 have requested a CarHistory report, the estimated value of the vehicle will be included in the report. You can also investigate asking prices via online classifieds, and make some allowance for the negotiability of pricing.

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

If the vehicle you are considering is heavily accessorised, or has more (or fewer) kilometres than average, or is in above average condition, some allowance in the pricing should be made in consideration of that.

You can qualify for a private sale car loan in Australia if you are:

• Over the age of 18; and
  

• An Australian citizen or permanent resident; and
  

• Earn at least $25,000 per year; and
  

• Hold a valid provisional or full driver licence
  

If you use our smart form and find a lender you want to apply with, you will be directed to the lender’s website and need to supply all documentation as you normally would when applying for a car loan, which may include:

• Proof of identity - i.e. passport or driver licence
  

• Details of income
  

• Details of any assets
  

• Details of any current debts and expenditure
  

• Providing your bank statements
  

Each car finance lender in Australia offers a different type of application, assessment, and approval process. In many cases, to mitigate the risk of fraud, the lender will require information about the specific vehicle you intend to purchase, such as:

• A copy of the current owner’s driver licence
  

• The current owner’s banking details
  

• An invoice from the current owner for the sale
  

If you do not find any available offers to compare, you can work with a vehicle finance broker to assist in finding you a suitable deal and completing your application.

Brokers operate all across Australia — whether you need a private sale car loan in Adelaide, Newcastle, Sydney, Canberra, Brisbane, Melbourne, or Perth, you'll be able to find one who can help you assess a range of suitable options specific to your financial circumstances.

Buying a car privately is a popular way to acquire a vehicle in Australia. It’s possible to obtain finance for privately purchased vehicles, however there are strict guidelines put in place to ensure the vehicle meets the criteria for car loan approval.

It is the buyer’s responsibility to conduct necessary checks and ensure the vehicle is not stolen, written off or still under finance by the seller.

In summary, if you’re applying for a car loan to buy privately, you’ll need to certify that:

• The seller owns the vehicle
  

• They have the right to sell the vehicle
  

• The vehicle’s title is free and transferable
  

• All proceeds of the transaction are going back to the seller
  

• The vehicle is in good condition
  

• The vehicle’s odometer has not been tampered with
  

• The vehicle has not been previously written-off or stolen