Purchasing a car from a dealership can mean higher sticker prices. With private owners, you can generally negotiate lower prices when the seller is finished making payments on the car. However, some car owners sell their cars before they are finished paying off the balance of the car loan. Before you can obtain the title of the car, the outstanding balance on the car loan must be paid in full.
Balance
The balance on the owner's loan is not transferable. When you seek to purchase the car, be sure you understand the terms of payoff for the car. You may incur additional fees, for example, if the car loan has a prepayment penalty. When the seller realizes he is responsible for additional costs, your purchase price can be raised.
Finding Financing
You can obtain a loan for a car with a balance on the loan. Once your lender approves you for a loan, you receive a cashier's check in the amount of the purchase price with the owner's name on the check. The check can also be made out to the seller's lender. The seller should give you the payment information before you seek a loan from your lender. Incorrect information on the cashier's check can result in delays in your transaction. If you are buying from a stranger, ask your lender to make the check directly to the lender.
Send the check to the lender through certified mail. Be sure the seller provides a receipt for the paid in full balance once the lender accepts the final payment. Since the seller does not own the car outright, getting the title is not an overnight process. "Transferring the title information when the seller has a lien on the car could take anywhere from two to four weeks or longer," explains Bankrate.
Approval
Obtaining a car loan is more than simply completing an application. Even with small loans, lenders take your credit history, income, employment and down payment into consideration. You may offer the seller a percentage of the payment in advance to offset the purchase price. Banks prefer that borrowers offer money toward the purchase price in addition to a loan. In many states, proof of insurance is also required to get a car loan. Bring a copy of your insurance card to verify your insurance coverage.
Blue Book
Before getting a loan to pay off the full balance of an existing car loan, be sure the car is worth the effort. Have a mechanic check out the car before you seek approval through a lender. Research the Kelley Blue Book value of the car online to determine the value of the car in its current condition. Not all cars depreciate at the same rate. If the car is worth more than the balance of the loan, it may be a good buy. If the Blue Book value of the car is worth less than the amount of the loan, the car is overpriced.
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