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Buying a vehicle can definitely be exciting. However, it is also one of the most expensive purchases a person can make in their life. While some people save up for a long time so they can have enough cash-on-hand to purchase a vehicle, that is pretty rare, depending on how expensive the vehicle is.

Trying to decide between buying a new car or a used one? Check out our infographic.

Instead, it is much more common for people to get a loan or take advantage of another financing option. While this is easy to set up if you are purchasing from a dealership, it can become more difficult when you decide to buy a used vehicle from a private party. Most of the time, these deals are made using cash or a certified cheque.

However, it’s still possible to get an auto loan for a private party sale. This article will not only give you a helpful overview of private party auto loans, but it will also teach how to get a loan to purchase a vehicle from a private seller, as well as how to ensure the next vehicle you privately purchase is a good one.

Thinking about purchasing a used car from a private seller in Ontario? Read this.

What Is A Private Party And Private Party Auto Loan?

Before going any further, it is important to first understand what we mean by “private party” auto loan.

A private party is essentially someone who is selling their vehicle privately through an ad in the classifieds or a site like Craigslist, Kijiji, or Autotrader. As you can probably guess, a private party auto loan is a loan that will help facilitate a person-to-person vehicle sale, rather than a dealership-to-person vehicle sale. A lender will offer this loan to a borrower who needs some extra cash to purchase a car privately.

Click here if you’re trying to figure out how much car you can realistically afford.  

What Are The Benefits Of A Private Party Vehicle Purchase?

So, why would an individual elect to purchase from a private party instead of a dealership? Well, there are a few reasons.

One of the main reasons, plain and simple, is the cost of the car. Private party vehicles can often be purchased for less than a similar car would cost on a dealership lot. This is because dealerships incur many different expenses and have to raise the price of their vehicles in order to cover them. In addition, dealerships are businesses that need to make money, while many private sales are just about the seller breaking even or getting rid of a vehicle that they no longer want.

What is a certified pre-owned vehicle? Find out here.

Another benefit of buying a vehicle privately is that you don’t have to deal with the “games” and the pushiness of most car sales representatives. Most private parties want their cars sold quickly, so there will be no unnecessary sales tactics or hoops to jump through. This makes it much easier to negotiate and can leave both parties happy with the transaction that has taken place.

How to finance a car in Canada

Check out this infographic for everything you need to know about choosing the right auto financing. 

Where Can You Get A Private Party Auto Loan?

Now you know some of the merits of buying from a private party and are aware of the existence of private party auto loans, how do you go about getting one? The first step is to find a suitable lender, which usually isn’t a problem in Canada.


While some banks are willing to offer auto loans for private party sales, but their options might be limited in their options. They may also be selective about who they are willing to lend money to, meaning borrowers with low incomes or credit scores can sometimes be denied. However, there are likely many local lenders in your city or the surrounding area that could help.

Online Lenders

You should also be sure to search for private party auto loans online. There are lenders out there (like Loans Canada) who have helped thousands of people secure all types of financing, including private party auto loans. These online lenders can not only get you approved faster, but their application process is often much more convenient, as you never have to leave the comfort of your home to secure the loan.

Credit Unions

If you qualify for a credit union membership, you may be able to qualify for a private auto party loan with them. They often have affordable rates and offer flexible repayment schedules. They also are a good option for those with less than perfect credit, as they work with many different types of individuals.

How To Apply For A Private Party Auto Loan?

The next step is to apply. Different lenders might have different requirements on their applications, but most auto loan applications (especially online ones) are quite easy to fill out. Of course, you need to make sure that you are applying for a loan amount that is within your budget, to ensure that you are not running the risk of defaulting on your loan payments. Also, make sure that your lender is a legitimate organization! Look up customer reviews and confirm that the lender is listed in the Better Business Bureau database.  

For more ways of financing a used car in Canada, look here.  

Bad Credit Private Party Auto Loans

Having bad credit can feel like a very daunting uphill battle, especially when trying to secure a loan. However, there are bad credit lenders out there that can help all borrowers, even those with bad credit to get the car of their dreams.

It’s also good to know that bad credit car loans generally have more conditions to them and are often more expensive because of higher interest rates. However, they are still a great option for those with bad credit in need of a car loan. Rebuilding credit, while important, can take a while. So, if you need a new vehicle and don’t have time to repair your credit first, this is a solid option.

What to Consider When Purchasing a Car From a Private Party

When you are buying a used car from a private party (or from anywhere for that matter) there are a few considerations that you need to make.

Get an Inspection

One of the first things to always ensure is that you never purchase a used vehicle without getting an inspection done first. It is easy to see scratches or damage on the interior or exterior of the car, but it is much harder to see the damage under the hood. An inspection from a trusted mechanic won’t cost you much, but could potentially save you from buying a damaged car.

Check the Car’s History

Another important step to take is to request or purchase a car history report. This report will tell you the accidents the car has been in, if there are any liens, along with other necessary information. While some sellers are honest, you can’t trust everyone based on their word along, so properly checking the history of the vehicle is a smart idea.

Test Drive it

Of course, a used car shouldn’t be purchased unless it is first taken on a rigorous test drive. You should try out the car on different surfaces, streets, highways, etc. You should also try out every feature within the car. Test all the bells and whistles in the centre console to make sure everything is functional. Also, don’t be afraid to take the car up to some high speeds to ensure it can handle them.

Final Thoughts

Buying a car (whether through a dealer or through a private party) can be a stressful experience, but knowing you have various financing options available, no matter what should help the whole process seem a little bit less daunting.  

Looking For Private Party Auto Financing?

If you’re currently in the market for a new or used vehicle and need help with financing, Loan Canada is here.

Kale Havervold avatar on Loans Canada
Kale Havervold

In his over six-year career as a professional writer, Kale has focused on writing about finance, technology, cryptocurrency, entertainment, and sports. Kale's work has been published on Yahoo, RentHop, the Regina Leader-Post,, and Kale loves to create a wide variety of personal finance-related content. Including everything from how-to guides to featured articles, to advice pieces and everything in between. Whether he’s writing about the newest piece of technology or providing tips to help people with their finances, Kale is passionate about educating Canadian consumers and making sure they have the information they need to make the best decisions.

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