Private party auto loan
Private party auto loan is when you purchase a vehicle from a private party and not a dealer. private party auto loan involves some aspects of loans which are applied for dealership finance. Also, there are few factors that distinguish them. Purchasing a used or second hand car from an owner may turn profitable for you as compared to the dealer. This is very well possible if the history of the vehicle and car owner is well known. The possibility of additional or hidden prices is eliminated. There are certain differences that have to be considered before you decide on purchasing a car.
High rates for used cars
As far as used cars are involved, the rates for private party auto loans turn out to be pretty higher than purchase of new car. For an instance, the rates for private party auto loans from online source are higher by two points as compared to the traditional new auto loans. The interest rate is also found to be higher by 1.5 points compared to car purchased from a dealership. The rates may vary according to the credit history of the customer and many other aspects which involve loan application. Whereas, new auto loans from leadership offer fixed rates provided you are eligible for them.
Repayment period
The loan term for private party auto loan is less against the new car loan. The time duration for financing a new car is usually upto 72 months which might just be not possible in case of private party auto loan. The lenders usually agree to finance private party auto loans for 48 months, though exceptions should not be ignored. It is however recommended to finance auto loan for shortest possible duration if time or else you may end up in a situation where you will end up paying more for the car than its actual worth. It will also reduce the amount of interest that you will have to pay for the entire term.
Fees and Down Payments
In most of the cases, a down payment is not essential for private party auto loans. But it will serve better if you put some money down. This reduces the chances of overpayment for car loan in near future. Title, registration and taxes are supposed to be paid separately when you buy a new car. The dealer combines the title, registration and taxes with the loan amount. For private party auto loans, you will have to pay for the entire fees as the lender will not provide you with any kind of financing options.
Title transfer process
The title is transferred to your name as soon as you purchase a new car. But in case of private party auto loan it may take longer. The owner of the car may still have to pay the remaining loan amount that he owes on the vehicle and it may require a week or longer for the completion of the formalities. The time required for this process depends on the lender's location. To conclude, private party auto loan is a good option for a creditworthy borrower.
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