Why are car loan rates more expensive for private-party transactions?

"I want to buy a car and have been looking at both private sellers and dealerships.

I've noticed that private-party car loans are more expensive.

Why are these rates higher?"

“A private-party car loan interest rate is higher because of the perceived risk by the lender.
A car from a dealership is either new or comes with a warranty guaranteeing the vehicle is in good mechanical condition; a private-party vehicle does not.
As a result, the car loan rates for private-party vehicles are higher to reflect the unknown. Though, these loans shouldn’t be astronomically higher than a traditional loan.
Make sure to shop around to get the best rates for your private-party car loan.”
Eric Schad
Answered on Jun 10, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.

Did this answer help you?

Ask us a question by email and we will respond within a few days.

Have a different question?

You can meet us at our office and discuss the details of your question.

Read advice from car experts at Jerry

Easiest way to compare and buy car insurance

No long forms
No spam or unwanted phone calls
Quotes from top insurance companies
Find insurance savings — it's 100% free