Credit-challenged borrowers occasionally want to know if we can provide them with a car loan to purchase a vehicle from private party
Car loans and private party sellers
Here at Auto Credit Express, from time to time we get asked by borrowers with tarnished credit if we are able to arrange private party auto loans.
The short answer is no and there are at least two reasons why this is the case.
For one, Auto Credit Express is not a lender. The service we provide is to match credit-challenged buyers to dealers in their area that not only understand the issues they are facing, but are also signed up with a broad range of lenders that enable them to deal with practically all credit situations.
Secondly, even if we represented a subprime finance company, these lenders, as a rule, will not finance a private party loan.
The fact is, if a borrower has good credit, they shouldn't have a problem finding either a bank or credit union – both of whom are direct lenders – that will approve them for a private party auto loan.
But if the borrower has damaged credit and has to finance a vehicle with a subprime lender, they will find it nearly impossible to buy a vehicle from a private party if the car has to be financed. There are a number of reasons these lenders won't do this:
• Because of the higher risk, subprime lenders typically require a third party (the dealer) to verify a borrower's income, job and residence. This is needed to qualify the buyer for the loan as well as establish his or her job and residence stability
• Subprime lenders also require dealers to verify that the vehicle the customer is financing is what the paperwork says it is. In other words, the dealer verifies the vehicle's age and mileage as well as the equipment (such as sunroof, automatic transmission, power windows, etc.) it comes with.
• In addition, most high –risk lenders will not finance a vehicle with a branded title (rebuilt, flood damage, mileage unknown, etc.), so the dealer also has to verify that the vehicle being financed has what is called a “clean” title.
The Bottom Line
Because of the higher risks involved with subprime loans, credit-challenged borrowers usually can't get approved for a car loan if they're considering buying a vehicle from a private party.