How do you buy a car privately with a loan?

My coworker is selling their car because they just bought a new one. It's only like a year old, but they upgrade cars often like people do with iPhones. I want to buy it, but I've never purchased a car from an individual and I don't have the cash to buy it outright. What’s the best way to buy a car from a private seller?

Answer
Buying a car privately with a loan is similar to buying a car from a dealership with a loan. You’ll want to:
  • Check your credit score
  • Figure out your budget
  • Get your documents ready
  • Shop around with lenders
  • Get preapproved
Note that, from a lender’s standpoint, loans for privately sold cars are riskier than dealership-sold cars. So, your loan may come with a higher interest rate and shorter loan term.
If you have a credit score of 660 or higher, then lenders are likely to approve your loan application. If not, you may need a cosigner with a better score to qualify.
The documents you’ll need when applying for a loan include proof of identity, proof of residence, proof of income, and proof of insurance.
If you’re looking for affordable coverage, you can get car insurance fast with the Jerry app. Jerry will collect competitive quotes from 50-plus top insurance companies (like Nationwide, Allstate, Safeco, Progressive, and Travelers) so you can get the best deal available.
You should compare loan rates too by shopping around with lenders. Apply for preapproval with local and national banks, credit unions, and online lenders.
Once you’re preapproved and have selected a lender, let your coworker know! Then, you two can work on transferring the title, and you can start enjoying your new ride!
Lauren Smith
Answered on Nov 19, 2021
Lauren has written for World Nomads, the Matador Network, Korvia Consulting, and once upon a time Three Fates Games. She graduated from Columbia College of Chicago with a BFA in Creative Writing. After graduating, she moved overseas and lived in South Korea where she spent her free time traveling and going on road trips with friends. She misses the rest stop potatoes and is trying to figure out how to recreate them at home. She's now based outside of Chicago and when she's not writing she spends her free time reading, playing video games, and exploring whenever she can.
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