EchoBay Expert: I've found online the car I want to purchase but it's being sold by a person, not a regular car dealer. Do most lenders offer money for person to person auto loans and are there any differences in them vs. a regular new car loan?
Loyal Reader: Purchasing a used car directly from the previous owner is a great way to cut out the costs of a dealer markup and get the vehicle history right from the horse's mouth (rather than listening to the standard dealer story of the car belonging to an elderly grandma type who only drove it to church every week).
Luckily, there are lenders who deal with person to person auto loans, though there are certain aspects of these loans that you will need to be aware of. On the upside, you might not need a down payment for this car purchase since these lenders won't usually require one. However, your credit will need to be in pretty good shape and you will probably wind up paying a higher interest rate for this type of loan.
Once you purchase the car, be prepared to wait a week or two to get the title in your hands if the previous owner needs to pay off his or her current car loan. Even though person to person auto loans don't usually require a down payment, you will need the cash on hand to pay for the taxes, title, registration and license fees since you won't be able to roll those costs into the loan amount.
To find out exactly how much those costs will add up to, contact your local motor vehicles department and they should be able to give you a fairly accurate estimate.
Another difference vs. a new car loan is that used car loans generally have a shorter term which could mean a higher monthly payment since the loan is paid down quicker than a new car loan. Since used car loans frequently have much lower loan amounts than new car loans, this probably won't be an issue for you.