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HomeDriver's ResourcesDo Banks Finance Private Seller Cars?

We live in a “do it yourself” world which also spills over into the auto industry. Meaning that a lot of people have used cars which they would like to sell themselves. This makes them a private car sellers. Those who want to sell their used cars have several options. They can trade the vehicle in on another vehicle. Or they can take it to an auction. They can also advertise the car privately and make the sale this way. In any event, the buyer is going to have to come up with the money to make the purchase.

Do Banks Finance Private Car Sales?

private car sale

Most often when an individual is buying a good quality vehicle in Canada, they don’t always have the cash to be able to do so. Which means they have to arrange some type of financing. When they are buying this type of vehicle from a dealer, there is usually a chance to arrange the financing through them.

Many dealers have partnered up with a specific bank or lending company. They will submit loan applications to these institutions on behalf of the used car buyer. But, there are a lot of people who would like to buy a used car from a private dealer. These car sellers usually don’t have the advantage of being able to assist with funding for the vehicle. Unless they are willing to sell the car by allowing the buyer to make payments, this is not likely to happen.

This leaves the buyer with the task of trying to find the money for the full purchase of the vehicle. There may be an opportunity to get money from one of the Canadian banks.

How to Finance a Private Car Purchase in Ontario

Financing Plan

Banks in Canada have many different types of loans that they offer. When it comes to vehicles, there are some options available to borrow money to purchase a used vehicle.

Secured Loan

The most common type of vehicle loan from a bank is a secured loan. It means that some type of security is put up by the borrower in return for the bank giving them the money. In the case of a vehicle, the security would be the vehicle itself. This means that if the borrower doesn’t honor the lending contract, then the bank can seize the vehicle based on delinquent payments.

This type of loan is usually easier to get compared to some of the other options. The banks have the security of the vehicle. When it comes to financing a vehicle from a private seller the bank may want to take a different approach such as offering an unsecured loan.

The Advantages of a Secured Loan

It is easy to see the advantages of a secured loan on the Bank’s part. But there are some advantages to the lender as well which are:

  • Overall the process for getting a secured loan is easier than for other types of loans
  • In most cases, there is an opportunity to borrow a larger amount of money
  • The interest rates may be lower than what they would be with a personal loan or line of credit
  • It may be easier for the lender to qualify for this type of loan

The Disadvantages of a Secured Loan

  • There are limitations as to what the money may be used for
  • The lender has to put in some type of collateral to get the loan

Unsecured Personal Loan

Banks offer different types of personal loans. These include an unsecured personal loan or a line of credit. It means the Bank will loan a specific amount of money that the lender can do whatever they want with it. Some people will use a personal loan to pay for a vacation or do repairs on their homes. Others may use it to purchase a vehicle from a private seller.

The Advantages of a Personal Loan

  • The lender is not required to put up any type of collateral for the money borrowed
  • It gives the borrower the opportunity to use the money in the way they want. For example, buying a vehicle from a private seller.

The Disadvantages of a Personal Loan

These loans tend to be harder to get

  • The Banks may have greater expectations for the borrower. They may expect them to be employed at a specific job for a longer period.
  • It may be harder to qualify for a personal loan. The Bank may require the borrower to have a lower debt load compared to secured financing.
  • The interest rates will usually be higher on a personal loan.

Options to  Finance a Car From a Private Seller

Option Decision

Banks are competitive so what they offer by way of personal loans may differ as well as the rates of interest. Here are some examples:


This bank offers different options for buying a vehicle such as:

  • CIBC Car Loan allows for up to eight years to repay. No down payment required
  • CIBC Personal Loan: This is the loan that one may want to apply for if they are going to buy a vehicle from a private seller. This loan is available for the purchase of vehicles seven years or older. It has fixed payment amounts.
  • CIBC Line of Credit. This option gives the borrower a specific amount of money that they can borrow from. They may want to use a portion of it to buy a vehicle from a private seller. The borrower only pays interest on the amount of money that they use from their line of credit.

RBC Bank

RBC also offers personal loans. Loans specifically for the purpose of buying a vehicle including purchasing from a private seller may be different for newcomers to Canada.

  • RBC Personal Loan: The RBC has some options that come with their personal loans such as fixed-rate loans or variable rate loans. The money can be used for major purchases or other needs.
  • Newcomers Loan for Buying First Car in Canada. This loan is reserved for newcomers to Canada and refers to the RBC Royal Bank Car Loan. The offering of this loan indicates that it applies to buying a car from a dealership or a private seller.

These examples are just a few of many options that may be available for financing a car being bought from a private seller.

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