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?"

Answer
“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.”
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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.
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