How to Buy a Used Car From a Private Seller

Many car buyers experience the struggle of seeing high used car prices at a dealer versus the reasonable costs of a private used car seller. And every day, buyers walk away without buying a car from a private seller because the process can be full of unknowns and what-ifs. However, you can smoothly navigate the perils and get an excellent deal with some planning. Let’s look at how to buy a car from a private seller.

Pros and cons of buying a car from a private seller

Buying a car from a private seller or dealer isn’t always straightforward. Prices vary wildly, and so does quality. Generally, buying a pre-owned car from a dealer comes with greater quality assurance. But unfortunately, pre-owned cars also come at a premium cost for the peace of mind you receive.

Get a vehicle history report on up to 50 vehicles per month with a Bumper subscription!

Buying the same car from a private seller may cost considerably less, because dealer profits aren’t part of the equation. On average, automotive dealers will make up to $3,000 on a typical used car. So, if you buy a car from a private seller, you could save some money, but that’s not the whole story. Let’s dig into more of the pros and cons of buying privately.

Advantages of buying a car from a private seller

At best, buying a vehicle from a dealership often takes a long time, comes with an uncomfortable conversation and is generally full of pressure. A used car is usually more costly at a dealership than anything you’ll find from a private seller, among other advantages.

Cheaper (usually)

Because of overhead costs and profit margins, a used car from a dealer will be up to 20% or more expensive than the same car from a private seller. Even if the private seller has researched the true value of their car and won’t lower the price, you still forgo the additional dealer fees, warranty, extra add-on upsells and pressure.

No sales tactics

A professional salesperson is trained to drive you toward purchasing a car, even if you don’t want one. It’s not unheard of for a salesperson to steer you toward a vehicle that doesn’t match your search but does give the dealership a higher profit margin. They don’t want you to walk off the lot and find a car somewhere else, whereas a private seller likely won’t have the same techniques.

More flexibility

Even though a private seller doesn’t have a sales manager over their shoulder pushing them to make a deal to meet a quota, they still want to sell their car. Depending on their need and sense of urgency, they may entertain offers from you that a dealer would never consider.

Potentially lower taxes

Many states have lower taxes on private car sales. For example, in Chicago, buying a $10,999 car from a private party would cost you a use tax of only $90. However, if you were to buy that exact vehicle at the same price at a dealer, you’d pay $989 in sales tax. Because taxes vary, investigate the fees and taxes you need to pay before purchase.

Disadvantages of buying a car from a private seller

Once you decide to buy your next vehicle from a private seller, you’re on the hook for doing your due diligence .There are no guarantees and many potential unknowns. Is the owner hiding anything? Do you have all the information? The truth is you won’t know for sure. From the possibility of scams to the need for repairs, there’s a long list of things to watch out for.

No onsite financing

Private sellers won’t offer to finance your purchase. These are typically all-cash or cashier’s check transactions, so you should be ready to pay up. This may mean you need to locate financing through a lender. Lenders may charge a higher interest rate (or decline to lend money outright) if the car you’re buying is especially old or carries higher mileage.

No warranties

Unless the private seller vehicle has its transferrable manufacturer warranty (usually good for one transfer), you’ll be buying the car “as is” with no returns. That means if something goes wrong with the car after you hand over the cash and the seller signs over the title, it’s yours to repair. Unlike a dealer, the seller won’t offer you an extended warranty, although you can purchase those online.

No right to cancel

In most states, a licensed used car dealer must offer you the option of purchasing a contract that lets you return the car within two days for any reason with some stipulations. If you sign the two-day return contract before buying the vehicle, you can cancel the sale within two days for any reason. Private sellers are not bound to this requirement. Once you buy the vehicle, it’s yours and you have no right to cancel your purchase or return it for a refund.

No lemon law protections

A lemon law will protect you if your vehicle is defective and can’t be repaired within a reasonable number of attempts. However, lemon laws are only applicable to used cars purchased from a licensed dealership.

No online recourse

Today, a bad Yelp review is as frightening to a dealership as a lawsuit. Negative reviews on sites like Yelp and Google can noticeably impact a business’s sales and reputation. But when you buy a car from a private seller, you don’t have the option of leaving a negative review outside of criticizing them to your friends on social media platforms. They don’t sell cars for a living, so they won’t care.

Risk of repairs

Buying a car “as is” means there is no implied or expressed warranty, and the private seller is not liable for repairs on the vehicle if it fails in any way after your purchase. Your best bet is to have a mechanic inspect the vehicle before purchase.

Possibility of scams

Unfortunately, a private seller could be trying to scam you by selling a stolen car with a fake title, title washing of a damaged vehicle salvaged by an insurance company or numerous other scams. If the deal is too good, walk away.

Car scams to watch out for when buying privately

Although car scams can happen with a used car dealer, they’re more likely to occur when buying from a private seller. Yes, you can find excellent deals through private sellers, but it’s easier than ever to get taken advantage of. Look out for these popular car scams.

Curbstoning

Curbstoning is when a licensed dealer poses as a private seller and attempts to sell a vehicle off the lot, often on a curbed street (hence the name). This is illegal in most states because curbstoners are often trying to pass off a lemon while bypassing consumer protection laws.

To try and avoid it, look for private listings that read like dealer ads (mentioning things like financing or having other vehicles to sell). Run a vehicle history report on the car’s VIN and even consider entering the seller’s phone number into a people search service to try and make sure it isn’t connected to a dealership.

Identity theft

Identity theft is often a danger if you’re selling your car, but it can also occur when you’re buying one. Be wary of sellers who want personal information, bank account information for transfers or credit card numbers to hold a car for you. If you buy the vehicle, there’s no need to pass along any more than the basic information needed for a title transfer.

Title washing

Title washing is when a vehicle with a branded title in one state is re-registered in a state that doesn’t recognize that title brand. For example, because few states issue flood damage titles, a scammer with a flood-damaged car would re-register it in a non-issuing state. While flood-damaged and other branded title cars can be bought and sold, they’re typically worth far less than the same car with a clean title. Title washing is a way to sell a car for more than it’s worth by withholding information from the buyer.

Regardless of the car’s mechanical and physical shape, run a VIN search or license plate lookup to look at the vehicle’s title status. A printed title can be forged, so it’s a good move to compare it to online records. As a rule, avoid buying cars titled out of state, particularly if (a) the state is nowhere near your own and (b) the make and model of the car isn’t particularly rare.

Odometer rollbacks

Changing a car’s mileage from 200,000 miles back to 30,000 miles is more challenging with newer automobiles, but it still happens. The National Highway Traffic Safety Association says more than 450,000 vehicles, on average, are sold with fraudulent mileage on their odometer per year. If the odometer doesn’t move while you test drive the car or the title mileage doesn’t match the actual mileage, you should run a VIN search to try and determine the exact mileage. On older cars with analog odometers, look for signs of tampering with the instrument cluster. It should fit in the dash without gaps and shouldn’t be loose.

Fake escrow

Although escrows are common when buying a home, putting your money in escrow when purchasing a car is rare and should be a tip-off. Scammers may attempt to set up fake escrow accounts during the car-buying process. Transferring money into that account while the deal is being completed is risky and may result in the seller, the car and your cash disappearing. If escrow is needed to buy the car, say no.

Other shaky title claims

“The car belonged to my mother, and nobody could find the title.”

“It’s on the way. I’m just waiting on a replacement from the DMV.”

The excuses scammers will come up with for not having a car’s title are endless. But if the seller can’t produce a title with their name on it, you don’t want the car, period. Otherwise you risk entering the murky waters of buying a car without a title.

How to buy a car from a private seller—safely

It may seem like you’re entering a jungle full of danger when buying a used car from a private seller. Still, people buy and sell vehicles from one another every day with no issues, and you can, too. Here are tips to consider before your next car purchase.

Secure financing first

Take an honest look at your budget and determine the amount you can spend on a car. Determine whether you have the cash to cover it or if you need a private auto loan. Having the financing taken care of will help you move quickly when you find the right vehicle and let the buyer know you’re serious when you ask for a deal.

Settle on the right car

Too many options can cause confusion, and that’s particularly true when looking for automobiles. With so many models available, it’s essential to narrow down the type of vehicle, model, year and mileage range you’re willing to consider.

How to decide on the right make and model

If you don’t know where to start when considering the right car, here are some suggestions:

• Consider the estimated mileage you’ll be putting on the car. This will determine the mileage range you’ll be looking for. If a vehicle has too many miles, you may need to get rid of it before it’s paid off.
• Consider the body type you need. If you are single, you can easily fit into a compact or midsize car. With a family, you need a larger car or maybe a minivan.
• Set your budget and stick with it. Remember that insurance, maintenance and fuel will be monthly expenses.
• Use a car finding tool like Bumper Marketplace. Online classified ads like Craigslist can also be useful.
• Review your research and check your numbers. Locate your target models and contact the sellers.

Ask the seller the right questions

When you find a few cars you like, get in touch with the sellers with some questions. The answers will not only provide important information about the car, they may also help you steer clear of potential scams.

• Why are you selling the car?
• Are you the original owner?
• Has it been involved in any accidents?
• What is the physical and mechanical condition of the car?
• Have you serviced the car, and do you have the service records?
• Does it have a transferable warranty?
• What is the odometer reading?
• Have you added any accessories to the car?
• Has it been modified, or had the ECU altered?
• Is it paid off?
• Is the title clean and clear? Any liens or shared ownership?
• Do you have a VIN report?
• What is your target selling price?

These are questions any legitimate seller should be able to answer easily and immediately. If the seller falters or evades your questions, that may be a sign for you to back away and move on.

Request (or run) a vehicle history report

Even if you’re satisfied with the seller’s answers to your questions, you can’t take their word for it. Many owners will go the extra mile and have a vehicle history report ready for you to review. If not, you can ask for one or ask for the VIN and get your own report. This report will help you check the vehicle history and title and view any existing warranty and service information. If you know or find the car has a salvage, rebuilt or lemon title, consider walking away.

Inspect and test drive

When you take the car for a test drive, pay attention to how the car steers, brakes, accelerates and corners. Because you researched this model of vehicle, you know what to expect when driving. Additionally, you should know what this model’s problem areas are and look for them.

After the test drive, check under the hood for any odd smells, leaks or sounds out of the ordinary. Check under the engine, transmission and differential for any signs of leaks. Most likely, the car has been detailed, but leaks will show up quickly. It’s also an excellent time to check the oil and coolant levels to see if there is any foaming or milky texture, which could indicate a cracked cylinder head or blown head gasket.

Settle on a price

There was probably a price listed, but your test drive may give you a reason to think the vehicle is not worth quite that much. Even if not, there’s no harm in trying to save a little money. Your research will give you other models to compare price, mileage and quality. The more information you have, the better off you’ll be when it comes to a final sell price. 

Get it professionally inspected

Unless you’re a mechanic, get the car inspected before handing over your cash. Make sure you plan ahead of time by having a trusted mechanic lined up to do a pre-purchase inspection. A pre-purchase inspection typically costs between $100 and $200. But it will cost you considerably less than the money needed for repair.

A mechanic will check the drivetrain, accessories, cooling, braking, suspension and overall condition. They will also test drive the car and give you a final report. Should there be any problems, they’ll provide the estimated cost to repair them. At this point, you can either ask the seller to pay for the cost of the inspection and give them the report or use it to negotiate the final price, knowing you need to get the repairs done. If everything checks out, you have the peace of mind knowing your car is a good buy.

Pay the seller

Cash is your friend when buying a car. The bill of sale will serve as a receipt. Additionally, if you use a cashier’s check, the seller may want to meet you at your bank to verify the check is legitimate. In the rare case your seller wants to use an escrow service, it should only be used if through a portal like eBay’s car marketplace, where you’re buying the car from a remote location.

Lower your risk of title and payment fraud, get help with paperwork, and transact online when buying or selling a car via our partners at KeySavvy!

Get the paperwork in order

Paperwork is essential in any significant transaction, especially in an automotive purchase. Although there are hoops to jump through, your documents vary depending on your state or territory. But some of them may include:

Title

The title process is well-laid out in every state, and yours will most likely follow this procedure:

• An original certificate of title with the current odometer reading
• A bill of sale
• A signed title by the seller and lienholder (if applicable) and the buyer
• Proof of insurance coverage and possibly the insurance policy documents
• Identification verification, such as a driver’s license or government-issued ID
• Method of payment for transfer fee and registration. Be aware that many DMVs still only accept cash or personal check.

Bill of sale

An automotive purchase bill of sale is a legal document that records the transfer of automobile ownership from one party to another, whether there’s money involved or not. The seller fills out the bill of sale with the required documentation. Its purpose is to protect the buyer and seller from disagreements after the sale. The information required on a bill of sale can vary by state but generally includes:

• Date of purchase
• Name and address of the seller and buyer
• Amount paid for the transfer of ownership
• Description of the vehicle being transferred
• A guarantee the item is free from liens
• Representations or warranties
• Signatures of the seller and buyer

The buyer and seller should keep copies of the bill of sale should any disagreements occur after the sale. Generally, the seller holds a copy of the bill of sale and the buyer owns the original.

Once you file the required paperwork with your department of motor vehicles, you also pay the fees and taxes. The DMV will give you an electronic or paper version of your new title.

Emissions documents

Most states require automobiles to have emissions tests every two years as part of the registration process. The current owner should have that certification documentation for you to review. However, if you buy the car, the current certificate is only good for 90 days after the sale. As part of the title and registration process, you need to get a new emissions certification.

Insure and register the car

Before you drive your vehicle off the owner’s property, you should ensure your new vehicle is insured. If you already have car insurance, your current policy may allow for a grace period of 30 days to inform the insurance company of your new purchase. Like all the steps, plan this out before the sale by telling your insurance company of your intentions. It’s also important to register the car with your DMV at your earliest convenience. Most DMVs give you 10-30 days, but take care of this as quickly as possible.