Not all lenders accept private car sales for secured car loans. For those that do, additional information is required to mitigate the risk of fraudulent activity. This differs from purchasing through a licensed motor dealer, where the lender benefits from safeguards tied to the dealer’s business credentials.
Licensed dealers adhere to strict regulations to maintain their status, ensuring easier accountability for lenders. In contrast, private sellers lack such regulations, making the transaction riskier for lenders. Consequently, secured car loan lenders require extra documentation to verify the legitimacy of both the buyer and the vehicle.
Key Requirements for Private Car Sale Loans
When securing a car loan for a private sale, the following documents and steps are typically required:
- Seller’s Driver’s Licence
- Registration Certificate
- Proof of Seller’s Bank Account Details
- Independent Vehicle Inspection Report
- Photographs of the Vehicle (if requested)
- Signed Private Sale Invoice (agreement on price)
- Payout Letter (if the vehicle has outstanding finance)
All documents, including the seller’s driver’s licence, registration certificate, and bank account details, must be in the seller’s name to ensure the vehicle’s ownership is legitimate and that funds are directed to the correct account. The signature on the driver’s licence should also match that on the private sale invoice.
Vehicle Inspection and Report
An independent vehicle inspection may be required to ensure the car’s condition and ownership history. This can be conducted by reputable companies like Marshalls Batteries, RACV, RACQ, or RAA, or through a local broker if applicable. In some cases, a roadworthy certificate may be accepted, depending on your state’s requirements.
Many lenders now accept the use of a DoxAI (formerly Verimoto) report to verify the ownership of a vehicle in a private sale. This process involves the seller using their smartphone to capture live photos of the vehicle, along with images of their ID and a selfie. These photos must align with their proof of banking details and the vehicle’s registration certificate. The entire verification process is securely completed through artificial intelligence for accuracy and efficiency.
Why These Steps Matter
While it may seem like extra effort, these requirements protect both the lender and the buyer. They ensure the vehicle’s legitimacy and safeguard against potential legal or financial issues down the line. Plus, your broker will manage most of this process on your behalf, making it straightforward for you.
Though the approval process is similar to buying from a dealer, be aware that if the seller has a history of negative dealings with the lender, the purchase may be declined. However, such instances are rare.
Buying from a private seller offers greater flexibility and can often result in significant savings compared to dealership purchases. These additional steps help secure a smooth transaction, giving you confidence in your purchase.