Buying your next vehicle privately may be a great way to go. Private sellers only have one thing in mind when selling – and that’s selling! Dealers have their livelihoods on the line. They need to make quotas and commissions. However, without great risk, there is no reward. Private sales do not have the consumer protections that dealer sales have. This can make some lenders nervous.
The main difference is this – dealers are licenced, private sellers are not. Dealers must be what’s known as a Licenced Motor Car Trader (LMCT – you may hear this acronym spelled out on the radio followed by a number, indicating the dealer has such a licence.) If a deal falls through or goes awry, lenders have many avenues to pursue returns and refunds from a dealer. A dealer selling write offs or stolen vehicles will lose their livelihoods very quickly. Private sellers – if you aren’t too careful – may give false information so you can’t track them down.
Unless you are eligible for an unsecured car loan, it’s likely you’ll be taking out a secured car loan. This means the car you’re purchasing is a collateral or “security.” This ties the loan to an asset of value.
To prove to all parties concerned the asset of value is what it claims to be, lenders that allow private dealer sale finance are much stricter with how much information they need before they grant approval.
Usually, lenders need to know who is receiving the funds, if that person is the lawful owner of the vehicle and that the vehicle is the same one indicated on the certificate of registration.
If you are buying privately, a lender will ask you to provide the seller’s drivers licence, certificate of registration and their bank account details. These will all have to be in the same name and have matching signatures.
This reduces the risk of funds going to the wrong people. Your lender or broker may also ask you for photos of the car.
You will also need to have the vehicle independently inspected. You can hire your states’ Royal Automotive Club (RACV, RACQ, NRMA, etc.) or a properly licenced mechanic to carry out an inspection. You may also need a current roadworthy certificate (RWC) if your state requires them.
This report will contain the Vehicle Identification Number (VIN) and chassis number, engine number and registration plate and state details. Your lender or broker uses this information to see if there is any money still owing on the car to other financiers or is reported stolen or a write-off. If your seller owes money on the vehicle, your financier will need to see a payout letter first.
This might sound like one big hassle. All this work is actually for your benefit. This puts in more safeguards to protect your finances and new property. If you find finance with a good broker, they can settle these affairs for you. It also shows if your seller ticks all the right boxes without finding out the hard way.