Dealership vs Private Party Auto Loans

Get Car Financing
Even with poor credit.

By

Automotive Content Editor

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, Automotive Content Editor - October 20, 2021

You could use the loan you get through a bank to buy a car from a private party seller, or from a dealership. But you can't use a loan from a dealership to buy a vehicle from a private party. Here's why, and how to decide which loan is right for you.

Getting a Loan From a Direct Lender

When you get an auto loan to buy a car from someone who is selling their used car themselves, you typically go through a bank or credit union. These are known as direct loans, and they can be used to purchase a vehicle pretty much anywhere. Once you have a check or an approval in hand, you're essentially a cash buyer.

This is normally the traditional image someone has in mind when they're getting a private party auto loan. This process is also known as getting preapproved for an auto loan. These loans may require a higher credit score to qualify but usually have some perks, like lower interest rates.

Just because lenders at banks typically cater to higher credit consumers, doesn't mean you're out of luck looking for preapproval. If you're struggling with credit issues, but are a member in good standing at a credit union, you may have more luck qualifying for an auto loan. Since credit unions are non-profit organizations, they often pass savings on to their members.

Getting a Loan From a Dealership

Getting a loan from a dealership means going through a third-party lender. These lenders are behind the scenes, and you work with the finance and insurance manager at the dealership as an intermediary. This means being prepared for your loan before you arrive at the dealership.

If you have good credit

Your options are wide open; borrowers with good credit typically have the option to finance just about anything in their price range. Good credit borrowers may be able to finance with a third-party independent lender, or through an automaker's captive lender at a franchised dealer.

If you have poor credit

Borrowers with bad credit may need to seek out a special finance dealership in order to qualify for an auto loan. Bad credit auto loans give you an opportunity for credit repair when you make all your payments on time. They also tend to come in longer loan terms, with higher interest rates. You may not be able to haggle as much with a lower credit score, but you should always know where you stand credit-wise before starting. Some captive lenders, such as Kia Motors Finance, and Ford Credit, do work with people who have lower credit scores, but these loans may have more requirements than others.

Working With a Special Finance Dealership

If you work with a subprime lender through a special finance dealership, you have a better chance of qualifying for the loan you need with poor credit, because these lenders look at more than just your credit score. Often you need to prove your creditworthiness by bringing in documentation to prove your ability, stability, and willingness to repay the loan. These requirements include proof of income, employment, residency, and down payment, which is often at least $1,000 or 10% of the vehicle's selling price.

When you work with a special finance dealer your credit score doesn't stand in the way of your auto loan. You work with the special finance manager to submit your loan to their lender(s). If you're approved, you then choose a vehicle from dealer stock that meets your loan amount.

If this sounds like the way toward your next auto loan, we want to help. Here at CarsDirect, we have a nationwide network of special finance dealerships that are signed up with the lenders you need. If you're ready to get the ball rolling on your next car start by filling out our fast, free, no-obligation auto loan request form and we'll get to work matching you with a local dealer.

$1 Credit Report

Get your credit score now!
Get a copy of your most recent credit report too.

Get Your Report & Score

Auto Refinance

Refinance your car or truck now. Get a better interest rate and lower payment.

Refinance Your Car

Vehicle Warranty

Protect your vehicle and you could save thousands on auto repairs.

Get a Free Quote

Need a Car Loan?

It only takes a minute.

, Automotive Content Editor

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.

Privacy Policy|Do Not Sell My Personal Information|Terms of Use|Cookie Policy|Disclaimer|
COPYRIGHT 1999-2022 MH Sub I, LLC dba CarsDirect.com