How to Buy a Used Car from a Private Seller
How to Buy a Used Car from a Private Seller
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If you're looking to pay a rock-bottom price for a used car, the answer is almost always buying from a private seller. However, there are important pros and cons to keep in mind before doing so.
That means buying from an individual, not a business routinely engaged in buying and selling cars for a profit. Yes, you give up the fancy showroom and probably any financing options. But there are pluses to private sales, too.
Here are some of the important advantages and disadvantages of going with a private seller and what you need to know as a buyer.
Advantages of buying a car from a private seller
Whether you’ve decided to buy a car from a private seller in order to get a good deal, avoid hidden fees or simply because you found the exact vehicle you’ve always dreamed of, there are a number of advantages to purchasing from an individual.
Low price is the most important advantage to buying from a private seller. In fact, if your first concern is budget, but you have some cash on hand and don't need to finance, it's almost always the way to go.
- There are no dealer fees. Nearly every dealer adds $500 to $1,000 to the price of the car in dealer fees, documentation fees and other fees that get tacked on to your bill of sale — sometimes at the last minute as you get ready to write a check. Since a private-party seller is not a dealer and has little or no overhead, the private seller can offer a lower price
- Private sellers typically won't try to sell you extra warranties. While problems are usually rare, even short warranties cost money or add risk for the seller, and they drive up the price on used cars.
Level playing field
A professional car dealer has probably sold hundreds or thousands of cars. You, on the other hand, have probably bought and sold just a few.
But when you buy from a private seller, chances are you and the seller are negotiating on a much more level playing field.
When you buy from a private seller, they want to finish the sale and get back to life. This means a ready buyer who can pay immediately will probably get a good deal.
In contrast, a professional car salesperson is going to be on the lot all day. They're not in a rush, and buyers come in all day long. It's much easier for them to turn down a lower offer on a car than it is for a private seller who needs to get back to their life. This favors the buyer.
Disadvantages of buying a car from a private seller
No dealer warranties
A private seller can't offer you a warranty. But if the car is relatively new and has low mileage, you can check whether existing warranties transfer with the car.
The vast majority of private vehicle sales are made upfront with cash.
- In some cases, if you have solid credit and a good relationship with a bank or credit union, you could get prequalified for a vehicle loan or personal loan.
- However, you'll typically have to line up financing yourself.
No right to cancel the sale
In some states, dealers are required to let buyers cancel the purchase within a few days if they have a change of heart.
With a private seller, once you sign the title and hand over your money, you're committed.
No lemon law protections
Lemon laws are designed to protect car buyers who purchase defective cars. While each state has different requirements, the basic idea is the same:
- If a dealer sells you a car with a significant mechanical defect that can't be fixed quickly, it's required to offer you a replacement or refund.
- But only a few states extend lemon laws to include used cars, and most don’t extend them to private sellers.
No social media recourse
If you're not happy with your experience with a car dealer, you can leave a negative review on social media and review sites such as Yelp.
- Most dealers are very sensitive to bad public reviews, and they will make reasonable efforts to make you happy.
- However, there's usually no such recourse with a private seller. Again, in the vast majority of cases, when you buy a used car from a private seller, you're buying it as is.
Risk of repairs
When you buy a used car from a private seller, you are taking on all the risk of repairs.
- If the transmission falls out of the bottom of the car tomorrow, you'll have to pay for the repair.
- If possible, ask a mechanic to inspect the car before you purchase it to reduce your risk.
Always keep these risks in mind when you're calculating your offer.
Documentation for buying a car from a private seller
When you buy a car, you also need to assume formal ownership of the car with your state's department of motor vehicles. Each state has its own process, but in general, here's what you'll need.
The car's title tells you who owns the car. If the seller has financed the car with a third-party financing company and hasn't paid off the loan, it's a red flag.
- The seller doesn't fully own the car and has no right to sell it to you without the finance company's permission.
- The financing company has a lien on the vehicle and can take it back from you if the seller stops making payments on the car.
When you go to buy the car, the seller should be able to show you the title — and the seller should be listed as the owner. There should be no financing company listed on the title, or the seller should have a lien payoff document from the financing company.
However, even if the seller presents a lien payoff document, call the finance company directly to verify it. Be alert for the following kinds of title problems:
- Salvage titles: A salvage title indicates that the vehicle has been certified as totaled by an insurance company. In other words, at one point in time, the car needed more repairs than it was worth. It could also indicate that the car has severe problems, such as flood damage or corrosion.
- Rebuilt: If a title indicates the vehicle is rebuilt, it generally means the car has been deemed a total loss to the insured and has been sent to an authorized rebuilder to make the car roadworthy again. These cars should not command the same price as a car that is not rebuilt.
- Lemon/factory buyback: If the car has ever been deemed a lemon, most states require that fact to be annotated on the title.
Bill of sale
The bill of sale should identify the following:
- Car year, make and model
- Vehicle identification number (VIN)
- Sale price
- Date of sale
- Names and addresses of buyer and seller
- Notation of any conditions or guarantees on the car. In the vast majority of private sales, the proper notation would read "sold as is". This indicates that the seller makes no guarantees or warranties, and the buyer understands this fact.
Check for smog test or emissions testing paperwork if your state requires it. In some states, the seller must have an emissions test done within a certain time frame before the sale.
What if the private seller doesn't have a title?
Don't buy the car. You have no way of knowing if the title is clear and therefore no way of proving you own it.
If the seller claims they lost the title, then they can apply for a duplicate title and should provide it to you before you buy.
Title transfer procedures for a used car
When you actually purchase the vehicle, you'll need your signature and the seller's signature on the title with the date.
- If there are multiple names on the title, you'll need their signatures, too.
- If they aren't available, don't buy the car. The seller needs to come with a clean title.
Be sure to record the odometer reading on the title at the time of sale. If there's no bill of sale, you must also generally record the sale price on the title document.
Some states — Ohio and Pennsylvania, for example — may require a public notary to sign off on the transfer of the title.
Get a VIN check when buying a car from a private seller
It's usually a good idea to get a vehicle history report, also known as a VIN (vehicle identification number), check. You can get a VIN check online from a number of vendors such as Carfax and AutoCheck.
The VIN check can tell you a variety of things about the car, including:
- Ownership history
- Title blemishes
- Existing liens on the vehicle
- Vehicle maintenance history
- History of odometer or title fraud
- Flood damage
- Airbag deployments
- Lemon status
How to find the VIN on a car
You may be able to get the VIN from the seller over the phone, so you can do a VIN check before you even go out to see the car.
The seller can find the VIN:
- On the driver's side of the dashboard
- Under the hood in front of the engine
- Inside the driver's door jamb
- Under the spare tire
- Or in a rear wheel well
Alternatively, you can ask the seller to provide a VIN check. Ideally, you'll be able to get it directly from the VIN check vendor's website. This eliminates the possibility of the seller altering the information on the report or deleting pages before handing it over to you.
Questions to ask when buying a car from a private seller
You should ask the seller lots of questions. Some key questions include:
- Why are you selling the car?
- Has the car been in an accident?
- Can I see your service records?
- Which car parts are no longer original?
- Where have you been taking the car for maintenance?
- Who owned the car before you?
- Have the airbags ever been deployed?
- What issues have come up with the car since you bought it?
- Who has been driving the car, and what was the car used for?
Test drive the car
Before you test drive a car with a stranger riding along with you:
- Ask to see a photo ID.
- Take a photo of it.
- And email it to a friend using a mobile device for safety reasons.
You should also ask the seller for proof of insurance. If the car isn't insured and you have an accident, the injured party could sue you for damages.
This is especially critical if you're a first-time car buyer because you probably don't have insurance yet.
If possible, inspect or test each of the following items:
- Air conditioning
- Power steering (steer all the way to the left and right and listen for crackling or whirring noises)
- All windows and locks
- Signals, brake lights, reverse lights and headlights
- Cruise control
- Stop-and-go performance
- Highway performance
Check for wear and tear on the gas and brake pedals, floor matting, brake pads and tires. If you're buying a relatively low-mileage vehicle, they should not show much wear.
If they do, this could be a sign of odometer fraud, which is when the seller illegally manipulates the odometer to show a lower mileage than the car actually has.
Get a pre-purchase inspection
If possible, make your offer contingent upon the vehicle passing an inspection by your own mechanic. Many auto repair shops provide a vehicle inspection service for around $100 to $200. It's well worth it to ensure you aren't buying a flood-damaged or mechanically unsound car.
Established dealers are used to customers asking for a pre-purchase inspection from their own mechanic. It's less common with private sellers.
What your pre-purchase inspection should cover
Before you purchase the car, you (or better yet, your trusted mechanic) should take a close look at the following:
- Body condition
- Exterior surface
- Computerized engine analysis (if possible)
Mobile mechanical diagnostic tools
Until recently, you couldn't get a computer code readout on a car unless you took it to a mechanic who has the necessary equipment to plug into the car's onboard computer, read the code and translate it. But new technology makes it possible for you to get a computer reading right from your mobile device.
For example, Fixd, CarMD, Hum+ and Zubie Key each let you run a computer diagnosis either on a handheld device or on certain smartphones.
- When you buy the app, you'll get a sensor that plugs right into the onboard diagnostics (OBD-II) port in the car's computer.
- Then you can get a code reading and computer diagnosis of any problem right on your handheld or mobile device, depending on the product.
- These apps should work with any vehicle built in 1996 or later.
It's not as good as getting an experienced mechanic to check out the car before you buy it, but it's a good alternative.
Consider meeting at the mechanic's shop. If you're serious about buying the car, this should be a reasonable request by the seller and indicates they aren't intentionally concealing any vehicle issues.
Be prepared to show proof of funds and agree on a fair price if the vehicle passes inspection.
- If the mechanic gives the vehicle a clean bill of health, consider buying the car.
- If the mechanic recommends repairs, then it's reasonable to deduct the cost of needed repairs from the purchase price of the vehicle, if the seller is willing, and then buy the car.
Key considerations after buying a car from a private seller
When purchasing a vehicle from a private seller, you have certain responsibilities as a car owner and can't rely on a dealership to handle documentation on your behalf. Make sure that you take care of all paperwork and other steps necessary soon after taking possession of your vehicle.
We recommend that you line up auto insurance before you drive away so there's no doubt you're protected.
We also suggest that drivers compare car insurance from multiple companies before purchasing a policy to get the best savings for a privately sold car.
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At a minimum, you must have your state's mandatory liability insurance coverage. Most states require drivers to carry either liability insurance or a proof of financial responsibility.
- If you already have car insurance on another car, you may have a grace period before you must formally arrange coverage on your new car.
- Some policies allow up to 30 days before you have to provide notice on a new car. But it's a good idea to get this coverage in place immediately.
- Most major carriers allow you to arrange coverage online or over the phone.
Note: if you only carry liability insurance on your old car, then that's all you'll have on your new one during the grace period, if any. If you want the additional types of protection, you'll need to add them.
Most private-party car sales are for cash. However, if you're financing the car, then most lenders will require you to add comprehensive coverage on the car.
You may also want to consider gap coverage. This insurance pays off the balance owed on the car which exceeds your comprehensive coverage payout if the vehicle is totaled.
When you buy a car from a dealer or private seller, you will need to register the license plate. In most cases, you can do this at a DMV office or an authorized tag agent's office.
These are private businesses that collect and forward your registration documents for a fee. They can be much more convenient than going to the state DMV in person.
Alternatively, you can usually pay your registration tax online or by mail, and they'll mail you your plates and registration stickers.
In order to register, be prepared to show the following documents:
- Proof of insurance coverage
- Vehicle safety inspection (in some jurisdictions)
- Emissions test documents (in some jurisdictions)
Beware of used car scams when buying from a private seller
Fortunately, the vast majority of sellers are honest. However, there are a few common scams you should watch for before handing over your money.
When a car is sold for salvage value, the law requires that fact to be reflected in the title. The title washing scam involves altering or falsifying a title to remove the salvage notation. An independent VIN check can help identify whether your car has a salvage history.
The fake escrow scam works like this:
- A seller advertises a way-below-market price on a car designed to get interest from many buyers.
- If you ask why the price is so low, the seller may use a few different tactics, such as claiming they're out of the country or have moved, to urge you to accept the price and make a deposit for the car into an escrow account.
- In some cases, the seller will offer to pay to ship the car to you, just to get the sale over with. All you have to do is deposit the purchase price with their escrow service.
- Then the seller will deliver the car to you, and you authorize the escrow service to make payment when you take possession.
The catch: the escrow company is fake, and you may either lose your money and get no car or get a car that doesn't work. In some cases, the criminals may even spoof a site that looks just like eBay or PayPal or some other trusted financial institution, and email you a link to click.
To protect yourself, pick an established escrow company that operates in a jurisdiction in which you can hold them legally accountable if something goes wrong.
There are a few variations on this type of scam. In one of them, the private seller advertises a low price and then asks the buyer to pay for the car via wire transfer. The seller takes the money and doesn't provide the car, or provides one in worse condition, and the buyer loses out.
Some sellers may promise a guarantee from a third-party money-transfer service like PayPal or Venmo. It is almost certainly a lie, as third parties don't want to get involved with guaranteeing used cars.
This type of scam involves a professional car dealer posing as an individual private seller. These are typically unlicensed sales of cars for profit and may be illegal in your jurisdiction.
Many of these sales are fine, but some dishonest dealers buy salvaged or flood-damaged cars at auction and then try to sell them to private buyers without disclosing the damage.
- These professional car flippers often have the technical ability to alter odometer settings, mask serious problems with the car and otherwise engage in fraud.
- They may also try to sell cars that have been salvaged out of state (title washing), hoping you can't discover the problem until it's too late.
To flush out a potential curbstoner, search for their phone number and email address on the internet. If it comes up associated with a long list of car ads, it may be a curbstoner.
Ask for service records. Most curbstoners won't have them.
When you respond to an ad, simply say, "I'm calling about the car you're selling." Don't mention a make and model.
If the seller asks, "Which car?" then chances are good it's a curbstoner. Not too many people are selling multiple cars at once.
A curbstoner likely owned the vehicle for only a short time. So do a VIN check and look through the service records.
Checklist for buying a car from a private seller
Here's a simple rundown of what to do and what not to do when buying a car from a private seller.
- Before seeing the car, look up the fair market value of the vehicle using Kelley Blue Book.
- Ask the seller for the mileage on the car so you can do your research.
- Ask the seller for service records.
- Check the registration. Does it match the title and the seller's ID?
- Deal with local sellers, if possible.
- Check the VIN on the car against the paperwork. It should match exactly.
- Test drive the vehicle, getting it up to highway speed.
- Check for recalls via the National Highway Traffic Safety Administration (NHTSA).
- If the car is less than four or five years old and has fewer than 100,000 miles on it, call the original dealer to find out if the manufacturer's or dealer's warranty is still in effect. If it isn't, ask them why.
- Buy from a seller who can meet you in person.
- See the car during the day. It's too easy to miss big problems at night, like rust on the frame.
- Bring a friend for safety.
- Don't rely on the seller's chosen mechanic for an inspection.
- Don't show up with cash. Use money orders or a cashier's check, if possible. You can meet the seller at your bank with a cashier's check in hand — and they should have the title and keys in theirs.
- Don't let sellers rush or pressure you.
- Don't use wire services to send money until you have the car, the keys and a verified title in hand.
- Don't buy cars with out-of-state titles unless you can confirm the vehicle's history.
- Ask for ID. Don't buy from any private party other than the individual named on the title and registration.
- Don't buy a car with a salvage title.
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