3 BIG Advantages of Private Party Auto Loans

There are definitely some advantages to choosing a private party auto loan to finance your next car purchase. There are a few disadvantages to consider also, but look for those in an upcoming post.

1. Flexibility

Private Party Financing gives you much more flexibility than traditional dealership loans for several reasons.

For one thing, unless you have 5000 to 25000 dollars in cash just lying around you can't just go and buy a car from a private seller. Buying from a private seller can save you thousands just look up the different values on edmunds.com or kbb.com.

Also, you get to pick your lender which means you can shop around till you find someone you like to deal with. Maybe you want to get your loan through the same company that handles your checking and savings accounts. Being able to deal with someone you trust and are familiar with rather than a mysterious dealership lender that works in the background is very comforting. Especially since you will typically have to deal with these people for several years.

2. Negotiating Power

Since private party loans are typically arranged prior to the buying process you are often at a significant advantage in negotiations.

You have a set budget which you can refer to when you are talking a seller down whether that be the slimy used car guy at the dealership or simply someone you found on craigslist. "I like this car, I really do... but I'm only approved for this much money- what can you do for me?" Since you have a concrete number that is out of your control (at least in that moment) its much more difficult for them to counter with something higher.

Furthermore since you are pre-approved for financing it is almost like cash in that you can close on a deal immediately. Rather than having to wait for financing approval which can often lead to salespeople sliding in additional charges etc. I've heard stories of salesmen quoting a rate that they new the customer would not get then letting them drive the car off the lot, only to call in a week to say that the actual rate they were approved for was higher and they would need to either pay more or return the car.

If you use a private party auto loan you can walk in with a blank check that will clear up to your approved loan amount. Pay on the spot as if you were paying cash. Simple and effective.

3. Accessibility

Often times dealership loans are only available to people with strong credit histories because they are for longer loan durations and their margins are lower due to the fact that they have to give the dealer commission for signing you up they cannot take on what they see as high risk borrowers.

Private Party loans are offered in much shorter terms and have nothing to do with dealerships so they can offer loans to a much wider group. If you have been turned down for a dealership loan you may still be able to afford to finance a car through a private party auto loan.

Of course having better credit will mean you can get a better rate than someone with poor credit. For those of us who have hit hard times or are young and haven't built up a credit history yet, being able to get a car loan is important.