Can I use a car loan to buy a car privately?

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If you are in the market for a car and looking for options outside of a dealership, you might be wondering if you can use a car loan to buy a car privately.

In Australia, you can use a car loan to buy a new or used vehicle from a dealership or private seller. However, it can be a slightly more complicated process when purchasing a vehicle from a private seller.

What to organize when buying a car in private

When using a car loan to purchase a vehicle from a private seller, you may need to have a financial inspection done for the lender to approve your loan application. A third party may be able to help you with this process, which may include:

  • PPSR check and VIN number check
  • Registration control
  • Compliance plates
  • Vehicle photos
  • Details of pre-existing safety issues or damage
  • Evaluation

As a buyer, you will want to find out if the car is currently registered. While it is not illegal to purchase an unregistered vehicle, you will need to factor this additional cost into your budget. Additionally, you will need to arrange for the car to be towed or apply for a short-term unregistered driver’s license to bring it from the seller to your home.

In some states in Australia, sellers may be legally required to provide safety certificates before the car is advertised, or before the sale or transfer of registration. What is legally required when purchasing a car may differ by state or territory, so it’s worth checking with your local authority before signing on the dotted line. You may want to have your mechanic perform a full inspection of the vehicle before purchasing it as well.

Most importantly, you will need to perform a Personal Property Security Register (PPSR) check on the private sale vehicle to find out if there are any funds owed on the car. If your auto loan application is approved and no financing is due, then you can proceed to the seller’s payment for the vehicle. If there is any financing due, then you will need to ask the seller for a letter of payment from the financier.

Your auto loan lender will first pay the seller’s lender for the value listed on the repayment lender, with the remaining funds then paid to the seller. Many lenders will work directly with the seller, so you don’t have to. It is therefore worth checking with your provider if they offer this service before continuing.

Checklist for buying a private car

FairTrading NSW recommends the following steps for buying a private car:

  1. Ask if any money is owed on the vehicle.
  2. Get the registration number, engine number, serial number, and vehicle identification number (VIN).
  3. Confirm that the registration number, engine number, serial number and VIN on the vehicle match those on the registration papers.
  4. Visit the PPSR website or call 1300 007 777 to search for vehicle with serial number and VIN.
  5. Purchase a PPSR search certificate to protect yourself against repossession.
  6. Check your options with PPSR if the current owner has debt on the vehicle.
  7. Complete the transaction by midnight the next day.


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