Can I get car finance for a private car sale?

Yes, you can get car finance for a private sale, but there are specific conditions. For instance, cars bought privately aren’t protected under the Consumer Credit Act 2015, which means you won’t have legal recourse if the car is faulty. Additionally, lenders may require more documentation and extra security because private sales carry a higher risk.

Some lenders allow you to finance a car from a private seller through a Hire Purchase (HP) agreement. This enables you to make monthly payments to the lender until you fully repay the loan. However, the finance is secured against the car, so you only become the car's legal owner once the agreement is settled.

In contrast, purchasing from a dealership usually offers more straightforward finance options. You can either pay the full price upfront or finance the car with a deposit. However, keep in mind that once your repayments are complete, you may not always have the option to return the car.

Before committing, make sure to review the key points of private car finance to ensure it’s the right choice for you.

What is a private car sale?

A private car sale is when an individual decides to sell their car privately, instead of using a dealership or other company. This car is sold as-is and the buyer can't return it or benefit from a dealer warranty.

How does a car loan work with a private seller

A car loan for a private sale works much like a regular car loan. After approval, the lender directly pays the seller for the car.

To make the process smoother, it’s a good idea to get pre-approved for finance before you start looking for a car. This way, you know your budget in advance and can act quickly when you find the right one. Once you've chosen your car, inform your lender about the purchase. They will then review your application and, if approved, transfer the funds directly to the seller, just as they would with a dealership purchase.

Where to look for finance for a private sale

You can find car finance for a private sale through specialised lenders. However, expect a more detailed application process, as lenders require extra security and information when dealing with private sellers. This is because private sellers don’t offer the same guarantees as dealerships, making the transaction riskier.

Three ways to finance a vehicle from a private seller

There are three main ways to finance a car from a private seller:

1. Car finance (Hire Purchase) : The most common option is using hire purchase (HP) finance. With this method, you’ll make monthly payments to the lender, and the loan is secured against the car. Once you’ve completed the payments, the car is yours.
2. Personal loan : You can also use a personal loan to buy the car upfront. This option doesn’t offer as much flexibility as car finance, and you won’t have the choice to return the car at the end of the repayment period.
3. Savings : If you already have the funds saved, you can buy the car outright and skip the financing process altogether. This lets you avoid interest payments and the need for a loan.

Buying a car privately vs. through a dealership

If you decide to buy a car from a private seller instead of a dealership, the payment and settlement conditions will differ alongside other crucial points.  

Thus, apart from identifying the financing sources, it’s essential to be aware of the main factors likely to come with a loan for a car from a private sale:

Additional details to secure the application

When financing a car from a private seller, your lender will need extra information to approve the loan. This often includes the car’s history and proof that there are no outstanding debts on the car — details that only the private seller can provide.

Before you apply for finance, make sure the seller is willing to share all the necessary information. If they refuse, it’s a red flag and a reason to question the legitimacy of the sale.

Finance company check before sale

Before finalising a private car sale, your lender will conduct a thorough check of the car to ensure the transaction is lawful.

It's also important to assess your income before applying for car finance. Knowing how much you can afford in monthly repayments will help you avoid financial strain. To assist you, we offer a free car finance calculator that can give you a clear estimate in advance.

Lower level of car finance agreement protection

When buying from a private seller, you won’t receive the same protection as you would with a dealership. For this reason, it’s always wise to consult a professional before signing a finance agreement.

Things to consider before getting car finance for a private sale

Check your eligibility

When applying for a car loan, your credit is the primary factor the lender will assess. They must ensure you can repay the loan responsibly.

Additionally, lenders often have specific requirements regarding the car's condition tied to the loan approval. Confirm these requirements before finalising any agreements to avoid surprises.

Pre-purchase checks

When you buy a car privately, you have fewer protections and warranties compared to purchasing from a dealership.

Always have a trusted mechanic inspect the car before finalising the purchase. A mechanic can identify and resolve any issues before they escalate, potentially saving you time and money.

Additionally, check the vehicle’s value using an online database. This helps you ensure you're getting a fair deal and can prevent potential issues before you buy.

Check The Age Limits

Different lenders have varying age limits for financing a car. Some will finance cars up to 5 years old, while others extend coverage to cars as old as 12 years. Confirm that the lender is willing to finance a car within your budget and age criteria.

Compare Interest Rates

Interest rates depend on the loan term. Generally, longer loans result in larger monthly payments but come with lower interest rates. Used cars often attract higher interest rates due to their increased risk, so it’s essential to compare rates carefully to secure the best deal.

Get advice on private car finance from our consultants

At Carplus, we provide expert guidance to help you secure the best car finance deal for a private sale. Various lenders offer different settlement figures, monthly payments, and interest rates. Our financial consultants actively assist you in finding the best offer tailored to your budget, credit score, and preferred vehicle.

With our top-notch service, highly praised by clients, you can trust that your car loan application is in expert hands. Let us help you navigate the process and achieve your car ownership goals.