How to Get a Loan for a Used Car From a Private Seller

Published

March 15, 2023

Bob Sullivan is author of the New York Times best-sellers Gotcha Capitalism and Stop Getting Ripped Off. His stories have appeared in The New York Times, the Wall Street Journal, and hundreds of other publications. He has appeared as a consumer advocate and technology expert numerous times on NBC's TODAY show, NBC Nightly News, CNBC, NPR's Marketplace, Terry Gross' Fresh Air, and various other radio and TV outlets. He helped start MSNBC.com and wrote there for nearly 20 years, most of it penning the consumer advocacy column The Red Tape Chronicles. See more at www.bobsullivan.net. Follow Bob Sullivan on Facebook or Twitter.

Buying a used car can lower the cost of your purchase, letting you move into car ownership with a much smaller loan. This might also be beneficial if you don’t have the credit or income to qualify for a loan amount that would cover a new car price. You might get an even better deal if you buy a used car through a private seller. However, it’s important to ensure you’re protected from scams and engaging in a safe transaction.

This piece covers how to buy a used car from a private seller. That includes how to get a loan for a used car from a private seller.

How to Buy a Car from a Private Seller

When you’re buying a car from a private seller, there are some additional concerns you may not have when buying a vehicle from a dealership. Private sellers don’t have consumer reviews and brand reputation you can consider. So, you have to do some legwork to ensure you’re getting a good deal and aren’t getting scammed. Follow the steps below to buy a car from a private seller.

Shop Around for Local Deals

Start by understanding what you can afford. If you want to know how to finance a private car sale, start by getting an auto loan first. You can apply for auto loans online or with a local bank. Once you get pre-approved, you know how much used car you can afford.

Not sure if you can get approved for a car loan? Get your credit score first to see your odds of being approved and work toward improving your scores before moving forward with your purchase.

Use your loan pre-approval or cash on hand to set a budget for your car purchase. Avoid going outside that budget so you don’t have a financial hardship once you buy the used car.

Start researching cars that fit your needs. Read about cars you’re interested in online, and look into different considerations for older models. This helps you know what type of common issues to look for when you start checking out cars from private sellers.

Next, review the cars available from private sellers in your area. You can research options on Facebook marketplace, Auto Trader, eBay and any local classified publications, such as your city’s newspaper.

Contact the Seller

Once you spot a potential new-to-you ride, start by making contact with the seller. Take some time to feel them out and ensure they’re legitimate. Avoid meeting anyone by yourself or in a location you’re not comfortable with. If the seller is willing to come to a public location with the vehicle, that’s best. If not, take someone with you when you go to their home.

Ask to test-drive the vehicle. If you can have a mechanic or someone you trust who knows a lot about cars look over the vehicle, do so. You can also look up the CARFAX report on the vehicle using its VIN. This database and others like it provide some information about the vehicle’s history, including potential accidents, service records and how many owners the vehicle might have had.

Once you’re confident you’ve found the vehicle for you, start negotiations.

Complete the Sale

Once you and the private seller agree on a price for the vehicle, move forward with the transaction. Make sure you get any agreement in writing to protect yourself in the future. You may also want to pay by check so you have a paper trail demonstrating that money changed hands for the car.

Verify ownership documents when you complete the sale. If the individual has the title on hand, they should sign it over to you at that time. If the seller owes money on the car, there’s a lien on the title. You’ll need a bill of sale indicating you paid for the vehicle. The owner will then take your money to their bank to pay off the car so they can get a title to transfer to you.

Complete the Paperwork

Even if you go through a private seller and not a dealership, buying a car requires lots of paperwork. You’ll need to:

Ensure you have a receipt or bill of sale documenting the purchase
Get the title from the seller at the time of purchase or after the fact
Go to the DMV with the title and ask for a transfer of ownership, which includes the completion of a form and getting a new title
At the DMV, you may need to pay tax, title and registration
Depending on your state, you may have to pay sales tax on the vehicle purchase

Bottom Line

Always have a plan when you’re making large purchases. Create a budget and stick to it to avoid overcommitting yourself financially. Do the research to protect yourself from scammers. If a deal seems too good to be true, it may be.

If you need a loan to buy a used car from a private seller, start by comparing auto loan rates. Then, you can prepare yourself with everything you need to help finance your new car.