Why do some banks give a higher interest rate if loan is for a used car from a private seller vs a dealer? Lightstream charges higher % when it is for private seller.
Since the money is directly deposited into your account and not to the seller/dealer, how would they know?
Some banks also charge a fee to get the car loan. (couldn't believe that)

If anyone has recently received a loan, please let me know if you got a rate on a 60/72 month. I've heard 2-2.25% is common for a 60 month loan. Thanks all.

 

I got 2.24 from my credit union when I bought mine. I don't believe there was any other fees that I recall. Mine was a used v8v from private sale. Was trouble free.

 

I got mine through Woodside Credit, the exotic car loan place in Cali. It was an easy flawless process. However got a 6% for 60 months on a 11 year old DB9. So pretty good compared to 2 other locations I got quotes from.

All depends on what year car you are looking to purchase also.

 

I got the 1.99 un-collateralized loans from Lightstream and have been very happy with the experience. I can't remember even answering a question as to whether it was from dealer or private but in both cases it was dealer for me.

That said, the process was a few min (how much money do you make, how much in various other accounts, etc...?) and then 24hr later or so there was a bunch more money in my bank account. Easiest process ever. So, unless they are asking for some sort of proof from you, it doesn't really matter what you say - you could subsequently go use the money for home improvements (maybe not legally, but you *could*). That's the whole point: They aren't on your cars title.

 

it depends on the risk profile of the buyer and of the lending institution. with private party deals there is higher beta (risk) for the bank in the transaction, which in turn ends up as a higher rate.

i currently have 2.24% for 72 months on a 2007 V8V with a credit union. i've seen as low as 1.74% for up to 65 months (requires full direct deposit to get this rate, otherwise .50% increase in rate).

other comments from personal experience:
- credit unions generally have the lowest rates.
- newer cars have lower rates.
- some institutions will match or beat rates, so shop around. i've done this on my last 4 vehicles.
- my last 4 loans have all had a 1-time loan modification tclause, meaning that i had the ability - at my discretion - to change (lower) the rate 1 time for free with no credit pull during the life of the loan. ive used this on two of my last 4 loans.
- there are 4 main scenarios that you'll fall into when buying: dealer in-state, dealer out-of-state, private party in-state, private party out-of-state. different lending institutions will fund different types of purchases. private party out-of-state (from a bank's perspective) is the most risky and there are less opportunities to fund this kind of purchase.
- ive never seen a fee to obtain a loan or refinance. if the lender is trying to charge either, or add points in any way, walk.
- always make sure the lending institution will fund the purchase of an "exotic" car. some dont, no matter how much the loan is for.
- always make sure there is no prepayment penalty in your loan agreement.
- i strongly suggest that for any auto loan, you evaluate the loan amortization schedule in detail and use that to get a realistic view of the possible financial situations based on your entry and planned exit of the vehicle. although not perfect, this can help make you aware of (and avoid) possible pitfalls where you're walking into massive negative equity. that said if you dont care about this kind of thing then dont worry about it.

if youre trying to purchase via one of the four scenarios above but your preferred lender (lowest rate) doesn't fund this type of transaction, here is what i've done (this was for private party out-of-state, executed on multiple cars):
- obtain financing for the lowest terms you can find from a lender that will fund the purchase type.
- use that funding line to purchase of the car.
- after your transaction is done, refinance that loan with your preferred lender. unlike a mortgage, there is typically no cost to do this (just a credit pull unless you have a recent one with the lender on file).


disclaimer 1: this is just from my personal experience and is not intended to be professional financial advice/guidance. you must do what is right for you.

disclaimer 2: all of the above is based on having excellent credit. if you do not have excellent credit, this changes dramatically and will cost you much more, if possible.

disclaimer 3: do not do this if you're looking to buy a house in the immediate future.

 

Penfed /thread

I got 1.49% APR with Penfed on a used car loan.

 

got the 1.99 with lightstream myself, being that it's unsecured i too wondered how they would know whether or not it was bought from dealer or not, they never even asked me for a BOS.

 

Emailed said Lightstream can ask for a bill of sale at any point in time. They are the only ones that I have heard of that have different rates depending on if you buy from private seller or dealer. Most places, a used car loan is the same rate.

 

yep that's what they said to me on the phone as well, nothing so far though. not sure what others' experience have been.

 

Credit unions are the one's to check out first. You'll have to open an account with them, but that's done at the same time as the loan paperwork.

The banks generally make the check out to the seller in my experience. That way the seller is more at ease that the check (bank check) will clear than a personal check. I am sure rates have gone up noticeably in the last 12 months.

 

I borrow against my brokerage accounts and pay myself...

 

I've found Bankrate.com to be helpful when comparing loan rates (for auto or other rate/loan research).
PenFed Credit Union (previously mentioned) has been my choice more than once for the best rate on a used auto loan, and they're super easy/digital to work with.
And agreed- Taking a loan against your brokerage account, or if you have a participating loan option or zero-cost wash loan option in cash value life insurance, it does feel better (and makes financial sense) to borrow from & pay back to yourself. In these cases, you are not liquidating your investment, but instead using it as collateral for an advantaged loan. Many who have one or both of these types of investments may not be aware of the loan privileges.