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 provided by
Answered on Jun 10, 2021
“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.”
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.
Browse by topics
What others are asking
Why is my car loan APR high if my credit score is 850?
"I'm shopping for a car loan and read that people can get interest rates of 2% to 3% with great credit. I have a credit score of 810, but the lowest APR I can find is 5%. What gives?"
Jun 10, 2021
What is the 20/4/10 rule in regard to used car loans?
"I'm not sure how much to spend on a car loan. However, I keep hearing about the 20/4/10 rule. What does this mean?"
Jun 10, 2021