Buying a private car on finance

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Updated On January 19th, 2023By Dynamoney

Here’s everything you need to know when buying a private car on finance

You might be wondering can you buy a private car on finance? The short answer is yes, you can. Buying privately as opposed to buying from a dealer or car yard does have its advantages. When buying privately you will have a larger variety of vehicles to choose from and often more opportunities to secure a great car at a good price, as the owner doesn’t have overheads like a dealership and may also be looking for a quick sale or be willing to negotiate. Even though buying a private car on finance does have its benefits, it can also be riskier and may involve a few more steps which are important to consider.

Steps to buying a private car on finance

Step 1: Apply for loan pre-approval

If you are planning on purchasing a car using finance, it is advisable to apply for car finance pre-approval.

To know how much you have to spend
To have the added confidence of knowing you won’t have any issues getting final car finance approval when the time comes.

Loan pre-approval in essence means that the finance company agrees to lend you a certain amount of money to buy a car, subject to your final credit approval and the notice of sale from the private seller. Once you find the car you wish to buy, and you tick all the boxes, the loan is then approved.

Step 2: Finding the right car

Once you have finance pre-approval, if you haven’t already done, so you will need to find the car you wish to buy privately. When buying a private car on finance, it is important to consider the age of the car. Most lenders will have an age limit for used cars as part of their lending criteria. For example, at Dynamoney, we have a 15-year end of loan term age limit. It is also important to choose a car that meets your budget and requirements in terms of size, colour, safety features and condition etc. We finance the purchase of used cars by all leading brands including Mazda, Kia, Ford, Honda, Subaru, Hyundai, Suzuki and Isuzu.

Step 3: Finance inspection

When you buy a private car on finance, the lender will require a finance inspection to be completed. A finance inspection includes a registration check, compliance plates check, photos of the car and lender approved reports to check for financial encumbrance (PPSR), odometer abnormalities and if the car has been previously written off or stolen. In most cases the car will be used as security over the loan, so the lender will want to ensure there are no issues.

Step 4: Mechanical inspection (optional)

A mechanical inspection isn’t mandatory, but when buying a car privately it is recommended to ensure that there are no issues with the integrity, safety and condition of the car. A full mechanical inspection will usually involve a check of the engine, exterior/interior, tyres, brakes, mechanics, logbooks, service history and if there are any signs of previous damage from an accident. Photos of the car will be taken, and they will test drive it to make sure it is in sound working order. Getting an inspection done can save you thousands in the long run and ensure you avoid buying a car that has any serious mechanical issues which are only going to cost you more.

Step 5: Paying for the car

Once you have chosen to buy the car privately using car finance, the lender, or Dynamoney if you choose to partner with us, will work with you and the seller to finalise the sale once you have agreed on the price. All you need to do is to tell the seller you will be financing the car and to expect a call from your lender. Once you have provided our team of car finance specialists with the seller’s details, we will contact them, confirming proof of ownership and the following:

The current registration certificate
The vendor’s driver’s license
Proof of seller’s bank details
Current financier payout letter (if applicable)
Vehicle inspection report
A copy of the sale agreement between you and the seller

We work with the seller to finalise the sale and to ensure you get your new car as soon as possible.

Things to consider when buying a private car on finance

Is the car I am buying already under finance?

It is always good to check if the car you are buying is already under finance. The seller should indicate so, but it is advisable to check and to be sure. If the car does have finance already attached to it, that doesn’t mean you cannot continue with the purchase it just means another step needs to be added to the process. You can easily conduct a Personal Properties Securities Register (PPSR) search online by visiting ppsr.gov.au to clarify if it is under finance or not.

If the car is under finance, one of two options will need to occur.

Option 1: The seller pays out their loan

Before you purchase the car, if the seller is able to, they can pay out the loan. This is the fastest option and the preferred one if possible as it makes the process quicker and easier.

Option 2: The seller provides your lender with a payout letter

Alternatively, if option one is not feasible, the seller will need to provide a payout letter. This is a letter issued from the seller’s lender and contains the following information.

The balance left owing on the existing loan
The due date of the payout letter
Lender’s bank details
A statement that outlines that the lender will release the interest on the title once the full payment has been received and update the PPSR registry to reflect this change

The payout letter provides all the necessary information to your lender, so they know the amount they need to transfer and where they need to transfer it to, to finalise the transaction.

It is also wise to consider the age of the car being purchased. All lenders will have a maximum age of car that they are willing to finance. At Dynamoney, we have an age limit of 15 years (end of loan term) when it comes to buying a car on finance privately.

Whilst there are some risks associated when buying a car privately, it is not only a common way but one that does have its advantages. If you are considering buying a private car on finance, contact one of our car finance team today so we can help you purchase your new used car. With varying loan options available our team can discuss the process with you to ensure your transaction is a smooth and enjoyable one.