Private Auto Loan

Back to all insights

Table of Contents

Not everyone can afford a new car. So, what are their options? Can they get a second-hand car loan?

We asked our private auto loan team to explain whether we can finance a second-hand car loan in Canada and how to go about it.

Can You Get a 2nd Hand Car Loan?

Yes, you can! The process is similar to getting financing for a new car. Though if you want to buy privately, you’ll need to have a personal loan from your bank.

However, buying a used car from a private buyer isn’t something we suggest, since you don’t know what you’re getting or what’s hiding underneath. Moreover, adding finance into the equation makes lenders nervous. If you take all the risk, it's best to buy from a dealer, who can give you a warranty and assurance of the car's quality. Remember, no legitimate dealership would risk its reputation by selling you a lemon! 

Read More: Approved Car Financing

How to Finance a Car Loan for a Used Car

As mentioned, the process is similar to buying a new car via a car loan. You need to:

  • Prepare for the loan: first, pay your down payment, check your credit history, prepare your current car for trade-in or sale to the dealership, then prequalify for getting the car loan, plan your budget, determine your maximum spending limit, and finally prepare all required documents.
  • Go loan shopping: Compare different loans and rates; shop around for the best deal. You can even consult with us—we’ll help you get preapproved for a car loan and prepare everything for the application.
  • Find a car: As a car dealership operating in Ontario, we offer a wide variety of high-quality used cars from every model you like. And if we don’t have the exact model you’re looking for, we can easily track it down for you.
  • Do the deal: Work out the deal, have your trade-in appraised or put down a deposit, negotiate the price, and finally sign the contract.

As you see, the process is the same as financing a car loan for a new one—fast, efficient, and almost painless!

We at CarRookie offer you a wide selection of used cars—all are safe, mechanically inspected, and come with warranties and guarantees. Poor credit or no credit? You can always count on us. We’ve got you covered!

Read More: Auto Maintenance Log
2nd hand car loan

Can You Finance a Car Loan for a Private Sale?

Yes, there are various loan cars that allow you to finance a car from a private seller. Since private sellers don’t offer financing like dealerships, you’ll need to secure financing on your own.

You can use different loan types to finance a private sale, including a line of credit, a personal loan, a private sale auto loan, or even tapping into your home equity.

Read More: Buying Your First Car

Can You Get a Private Sale Auto Loan?

Yes, you can. This type of loan is specifically designed for financing a car from a private seller. Using your bank, credit union, or an alternative lender, you can easily get a car loan for a private sale. These loans can be either secured or unsecured.

Keep in mind that lenders may place certain conditions on these types of financing options, including:

  • Vehicle specifications: Lenders often set specific requirements—such as the car’s age, condition, and value—for vehicles they’re willing to finance. For example, you may only be able to get financing for a used car that’s less than 10 years old and in good condition.
  • Minimum loan amount: Some lenders set a minimum loan amount when it comes to private sale auto loans—like $7,500.
Read More: Top 14 Used Vehicles Under 5k

Different Types of Private Car Loans

Here in Canada, we have different private auto loans:

Personal Loan for Private Car Finance

A personal loan is a one-time cash amount that the lender directly deposits into your bank account, and you can use it for any expense, such as purchasing a car from a private seller. Typically, personal loans have higher rates compared to car loans because they’re unsecured.

Loan terms will also vary depending on the amount of money you borrow, the lender you choose, and your financial profile—especially your income and credit score.

Read More: Used Car Prices Canada: 2025 market trends

Line of Credit for Private Car Finance

You can also use a secured or unsecured line of credit for financing private sale, giving you flexible borrowing with a pre-approved limit—similar to a credit card. A secured line may offer lower rates if you provide collateral, but be careful: missing payments could put your asset at risk, and the lack of a fixed repayment schedule can lead to debt if not managed wisely.

Read More: Lease a Car in Canada

Second Mortgage

If you own a home, you may be able to use your home equity for private sale auto financing. In this case, you have options like:

  • Home Equity Line of Credit (HELOC): HELOC lets you borrow money as needed using your home’s equity. You only pay interest on the amount you use, making it a flexible option for expenses like private sale auto financing.
  • Home Equity Loan: A home equity loan lets you borrow a lump sum from your home’s equity, which you repay through fixed monthly payments — unlike a revolving credit line.
Read More: Used Car Checklist
second-hand car loan

Advantages and Disadvantages of Private Sale Financing

Before applying, it’s essential to understand the pros and the cons of private car loan:

Pros

  • Possibility of lower price: Since you’re not buying from a dealership, you may pay less in interest and fees for a private sale. Moreover, many private sellers may offer their car for less than its true market value or the price charged by dealerships.
  • More potential for negotiation: Unlike dealerships, private sellers aren’t always experts at negotiating or sticking to pricing rules. With some negotiation skill, you can get a good car for a lower sales price.
  • Not untrustworthy dealership: Some dealers can be untrustworthy and may try to sell you unnecessary add-ons or secretly add hidden fees to the agreement. Typically, this is not an issue with private sale financing.
Read More: How Can I Buy a Car in Canada

Cons

  • Extra time and paperwork: In private auto financing, you have to handle the entire process on your own, including title transfer, registration, and financing. These are usually taken care of by dealerships when you buy from them.
  • Fewer Protections: Typically you won’t get a warranty with private sale financing. If the car still has a factory warranty, it might be limited and could run out soon. Also, if there’s a lien on the car, you’ll be responsible for paying off the debt.
  • Higher Interest Rates: Some car loans and lines of credit may come with higher interest rates compared to those offered by dealerships. On the other hand, dealerships sometimes offer attractive financing deals—especially if you’re planning to finance a used car or a certified pre-owned one.
  • Shorten Loan Terms: some lenders only offer short-term loans, which can result in higher monthly payments and interest rates—especially if you don’t have collateral to get a secured loan. Dealerships, on the other hand, often provide more flexible options.
Read More: The Best Used SUV to Buy in Canada

Tips on Buying a Car from a Private Seller

Safety first

When purchasing a car from a private seller, always arrange to meet in a public place to inspect the vehicle and finalize the deal. Avoid being alone with the seller at any time, as there's always a risk that they may not have good intentions.

Read More: Compare High-Risk Auto Insurance Quotes for Ontario

Find out the fair market value of the vehicle

Before agreeing to the seller’s price, find out the car’s true market value. This value should be based on factors like mileage, model, age, year, features, and condition. Once you know about the accurate price, you’ll be in a better position to negotiate and make a fair offer.

Read More: 8 Cheapest New Cars in Canada in 2025

Request a service record

If the vehicle has had any major repairs, make sure to ask for the paperwork that outlines what services were performed. This helps you understand exactly what was fixed and who handled the repairs.

Read More: Toyota Sienna Second Hand
financing a car from a private seller

Get the Car Checked by a Mechanic

Even if the private seller claims the car has been inspected, don’t rely on their word alone. Have a licensed mechanic take a look to confirm the vehicle is in good shape before finalizing the deal.

Read More: Importing Cars from the USA to Canada Older Than 15 Years

Take It for a Test Drive

Always go for a test drive before buying. It’s the best way to spot any obvious issues. While driving, pay attention to how the brakes, steering, transmission, suspension, and onboard tech work. Also, do a full walk-around to check for rust, dents, or other signs of damage.

Read More: Second-Hand Car Finance

FAQs

Who offers financing for a private car sale?

Banks: Offer loans starting at about $3,000 with terms of 6 months to 8 years. Though applying can take time and requirements are stricter, they offer competitive rates for those with good credit.

  • Credit Unions: Have similar terms to banks but may offer better deals for members with good credit. Loan processing can take 1 to 3 weeks, and you’ll need to meet with a loan specialist.
  • Car Loan Brokers: Help you compare multiple loan options from their partnered lenders, making it easier to find the best deal and customize pre-approvals.
  • Private Lenders: Provide more flexibility, especially for those with bad credit, but often have shorter terms and higher interest rates. They may also have restrictions based on the car’s age and condition.
Can I get a small private auto loan to finance a cheaper vehicle?

Online and alternative lenders often offer smaller loans, while banks and credit unions have minimum loan amounts, such as $7,500 at CIBC and RBC. If you need less, you may need to turn to private or alternative lenders.

Can I get a private auto loan for an older vehicle?

Yes, you can. However, your options may be limited. Banks and credit unions often have restrictions on the car’s age, with many big banks allowing cars that are no older than 10 years. For cars more than 10 years old, you may need to explore options with private or online lenders.

What interest rate will I pay on a private car purchase?

The interest rate you need to pay varies depending on the type of loan and factors like your credit score, debt-to-income ratio, and the car you’re financing. That said, you may have to pay anywhere from 9.99% to 35%.

What is GAP insurance, and is it available on private sale auto loans?

Guaranteed Asset Protection (GAP) insurance covers financial loss if your car is damaged or stolen. It will cover the difference between your car loan’s remaining balance and the insurance company payout. Depending on the lender, GAP insurance may be available for private car loans.

How to get a car loan for a private sale?

Shop Around for a Loan: Compare rates, terms, and fees. Consider getting pre-approved for better deals and negotiation leverage.

  • Apply for Financing: Submit necessary documents like bank and income statements. Some lenders offer online applications, with wait times ranging from hours to days.
  • Register the Car: After receiving the loan, visit a licensing office to register the car and complete the title transfer. Some areas allow online registration, while others may require an in-person visit.

Final Thoughts

Buying a used car is a smart and budget-friendly way to get a reliable vehicle. Even though it’s more affordable than buying new, the upfront cost can still be a challenge. That’s why CarRookie works with trusted lenders to help you explore financing options—so you can drive away in the car you want, without the pressure of paying the full amount all at once.

Related Posts