Finance Tips

Buying a used car directly from an owner will get you a much better deal than you would get from a car dealership. This is especially true in cases where the car owner and the car history are well known to the buyer. It eliminates the possibility of hidden surprises. On the whole, private auto loans have a lot in common with other methods of car financing. However there are also certain differences that can be important when deciding to purchase a car.

Higher Rates For Used Cars

When it comes to used cars, the rates for person-to-person or private auto loans invariably prove to be higher than those for a new car. To take an example, rates for private party sale auto loans from online auto loan lenders will usually be about two points higher compared to what is charged for traditional new auto loans and about one and a half points higher than the interest rate being charged for used car loans for vehicles purchased from dealerships. Moreover, the rates will fluctuate according to your credit history and other aspects concerning your loan application while new car loans from dealerships usually have fixed rates providing you qualify for them.

Repayment Schedules

Loan term may be less than that of a new car. The standard duration for financing a new car can be up to seventy-two months. In the case of private auto loans, it may not be possible to finance a vehicle for the same time period. Usually lenders are ready to finance private auto loans for up to forty-eight months, though there may be exceptions. However, auto loan financing should be done for as short a period of time as you can possibly afford. This is to ensure that you don’t end up in a situation where you owe more on the car than its value (upside down car loan) and to minimize the amount of interests you are required to pay.

Down Payments and Fees

With many lenders a down payment may not be required for person-to-person auto loans. Despite not being required, it is better to put money down. Doing this will reduce your chances of overpaying for your car loan in the future. Taxes, title and registration have to be paid separately when you purchase a new car from a dealership. The dealer normally combines taxes, title and registration fees into the loan amount. For private auto loans, the lender will not allow you to finance the fees and will require you to pay for them out of your pocket.

Title Transferring

On purchasing a new vehicle, the title is put in your name almost immediately. When it comes to person-to-person or private auto loans, it could take longer. The owner of the car you are buying from may still owe money on the car and it could take a week or longer for completing the payoff process. His lender needs to receive the payoff amount before he transfers the title to the car owner and then it can be turned over to you. The duration of this process is mainly based on the location of the lender. For a local bank, this process should not take more than a few days. However if the lender happens to be in another state, it could take much longer for the transfer to be done.

To briefly sum it up, private auto loans make a good option if you are a creditworthy borrower. However if your credit happens to be less than perfect, it may be better to turn to your local dealership as the best source for an auto loan.