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Can I get a car loan for a private sale?
Yes, most lenders in Australia offer private sale car loans. 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 generally 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 45% of all used car loan requests through Money.com.au are for a private sale vehicle (the remainder are sales through a dealership).
Our data shows:
- The average private sale car loan amount requested is $27,322
- The average age of the private sale vehicle being financed is 10.06 years
- Five years is by far the most common loan term selected
How to get a private sale car loan in Australia (step-by-step guide)
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.
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 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.
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
Shaun McGowan, Money's founder and 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."
Shaun McGowan, Money's founder and 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 7.00% - 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 found that, on average, cars bought through a private sale (10 years) are older than those purchased through a dealer (6.2 years). Older cars typically attract higher rates.
Vehicles financed through a private sale loan
Can I get a car loan for a private sale if the vehicle is already under finance?
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.
Tips on buying a car through a private sale
Buying a vehicle through a private sale can save you money. Money data shows borrower's 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.
How to check a car before buying 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 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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