Private Party Auto Loans
Since most of us, myself included, don't have a safe with a big stack of cash in it we need to finance our auto purchases. Most people go with dealership financing but there is another option. Private party auto loans are often a more practical solution depending on your situation. In General here are some of the major differences between the two types of loans.
Length Of The Loan
Private Lenders typically offer loans between 24 and 48 months. That is much shorter than the typical 72 month dealership auto loan term.
The end result is for the same principal you will have higher payments on a private party loan but generally pay only a fraction of the overall interest.
Higher Interest Rates
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.
Pre-Approval
In general you go through the loan approval process before you start seriously shopping for a car. Instead of picking out a car and then applying for financing which is the common practice with dealership loans. The result is more flexibility and negotiating power when you are actually shopping.
Furthermore since all of the loan processing is done before committing to buy a car, buyers with less than perfect credit do not have to worry about finding the perfect car only to be told after the fact that they cannot actually afford it.
Freedom To Buy From Private Sellers
Unlike dealership financing, private party car loans can often be used to purchase cars from individual sellers. This means you can use it to buy a car from a friend or family member, or from someone on craigslist or Ebay. This can open a lot of possibilities for finding good deals that would not be possible with a dealership loan. - 21392
Length Of The Loan
Private Lenders typically offer loans between 24 and 48 months. That is much shorter than the typical 72 month dealership auto loan term.
The end result is for the same principal you will have higher payments on a private party loan but generally pay only a fraction of the overall interest.
Higher Interest Rates
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.
Pre-Approval
In general you go through the loan approval process before you start seriously shopping for a car. Instead of picking out a car and then applying for financing which is the common practice with dealership loans. The result is more flexibility and negotiating power when you are actually shopping.
Furthermore since all of the loan processing is done before committing to buy a car, buyers with less than perfect credit do not have to worry about finding the perfect car only to be told after the fact that they cannot actually afford it.
Freedom To Buy From Private Sellers
Unlike dealership financing, private party car loans can often be used to purchase cars from individual sellers. This means you can use it to buy a car from a friend or family member, or from someone on craigslist or Ebay. This can open a lot of possibilities for finding good deals that would not be possible with a dealership loan. - 21392
About the Author:
Before you purchase your next vehicle, be sure to check out Luke's blog which has more information on buying a car using a private party auto loan
posted by X - Men @ 12:04 AM
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