You may have noticed that with some car finance companies, you can only use the money to buy a vehicle from a dealership. Perhaps you have wondered why this is, and felt frustrated that it limits your choice. After all, the point of gaining finance is so that you can buy better, but when buying from a dealership, you miss the better priced purchases that can be found from private sellers.
If you want a car loan to buy a used vehicle from a private seller, you need to talk to the right kind of finance company. Typically, car finance lenders fall into one of three groups:
- 1. Those that will only offer you a secured loan to be used when you buy from a car dealership.
- 2. Those that will offer you a secured loan for a dealership car, or an unsecured loan with a higher interest rate for a privately purchased car.
- 3. Those that offer you loans with attractive interest rates, whether you want to buy privately or from a dealership. 1800Approved is one of those companies.
Why are Private Sales Treated Differently?
Car finance companies have different restrictions for one simple reason: private sales are riskier for them. Understanding their reasons will help you to decide which company to approach.
Finance companies are always concerned with risk. With car purchases, the risk is that the customer may fail to make their repayments, in which case the company needs to recover its money somehow.
With a dealership car, the vehicle itself is the security for the loan, and there is a strong paper trail for the purchase. Its sale value seems to be more assured, because the dealer must have a Motor Dealers Licence in order to operate. As the risk is reduced, they feel able to lend an unsecured loan with low interest rates.
With a privately bought car, it’s harder to know that the seller genuine and that the car is legitimate. There’s less assurance that the lender will be able to recover the money if the customer fails to make repayments.
How Does This Affect Interest Rates?
If you want to buy privately, some companies will only offer an unsecured loan, which comes with a much higher interest rate. They do this to offset the risk of the private vehicle sale.
Others, such as 1800Approved, are happy to offer you an secured loan, with more attractive interest rates. This is because we base interest rates on the age and therefore resale value of the car, rather than the type of seller. However, we do perform some stringent checks on the sale and the seller, which ensures that the sale is genuine and the price is a good one.
In our next article, we’ll look at our used vehicle checks in more depth.
Are you looking for finance to help you purchase a new vehicle?
1800Approved is one of Australia’s fastest growing car and asset finance brokers. We specialise in car finance, equipment finance, plus insurance and warranty services, and have previously arranged deals from AU$10k to AU$5m. 1800Approved services clients across Australia, working with over 30 independent lenders to find the best deal.
We can also help with sourcing your new and used car warranty, and by sourcing vehicles and equipment through our Drive Wholesale arm.
To learn more about how we can help you, call us today on 1800 277 768.