A private party car loan is used to buy a vehicle from either an individual seller or from a dealership. This type of loan is sought by a used car buyer independent of the dealership. A private party loan is similar to a traditional auto loan you would get through a dealership but there are some differences.

Length Of The Loan

Dealership lenders typically offer loans of long terms, between 48 and 72 months. That is four to six years. On the other hand the typical private party auto loan is only 36 months.

Remember that the longer the loan term the more interest you end up paying over the course of the loan. Therefore, if you can afford to make higher monthly payments on a shorter loan term you will get the best deal.

Higher APR

On average interest rates are higher on private party loans compared to dealership loans. This may be misleading because private party loans accept people with lower credit scores but charge higher interest rates. If you have good credit you can usually find a rate that is comparable to what you could get through a dealer.

Loan Approval Prior To Purchase

Its typical for people to go to a dealer and pick out a car and only then think about financing it. Papers are signed before the loan application is even processed. This is not the case with private party lenders. The whole process happens before you decide on a car. Once you are approved you are given the loan amount to go purchase a car, which gives you a significant negotiating advantage.

Additionally, for buyers worried about their credit this process can relieve some of the stress of the typical application process since you know upfront how much you have been approved for and at what rate before you commit to a purchase.

Ability To Buy From Individual Sellers

Dealers have a lot of overhead, and those costs are passed down to the consumer whether you buy a used car or a new car. Unlike dealership loans where you can only buy from the dealer, private party loans can be arranged for person-to-person transactions as well. If you can get a great deal from a friend or Ebay then a private party auto loan might be exactly what you are looking for.

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