What to keep in mind when buying a used car from a private seller

Buying a car is an expensive purchase and that has many people turning to private sellers for a better deal. Here’s what you should know before buying a car from a friend or classified ad sites like Facebook Marketplace.

When it comes to buying a used car, you can get a good deal from a private seller, you just have to go into the process prepared. 

Before getting started let’s look at some of the pros and cons of buying a car from a private seller. Here are just a few:
 

Pros of buying a car form a private seller:

• You may be able to find a lower price than at a dealership
• The negotiating process can be less aggressive than with a salesperson

Cons of buying a car from a private seller:

• It can be easy to fall victim to a scam
• Some states have lemon laws in place, meant to protect consumers if they purchase a defective vehicle, but they only apply to dealerships

Guideline to buying a car from a private seller

Buying a car is usually a big-ticket item and one that you want to be extra careful about. If you’re new to buying a car from a private seller it can feel overwhelming. Here’s a guideline to help get you started:

1. Determine your budget: Take a look at your monthly expenses and any cash you might have in savings to put towards your vehicle purchase. Decide how much you can pay out-of-pocket when making the purchase, then decide how much you’ll want to borrow from a lender.
   
   
2. Get your financing in order: Once you’ve decided how you’d like to fund your vehicle purchase and you’ve determined you need an extra hand with the financing, learn more about your options when working with a private seller. 
   
   
3. Narrow your search: If you’re searching on an online marketplace that connects private buyers and sellers, you can filter to show nearby listings. This is important because you’ll want to see the car in person before you buy it. You can also search for private sellers, vehicle history and title status.
   
   
4. Examine the listing carefully: If you find a car that looks too good to be true it probably is. Make sure the photos match the description and that the seller is giving you all the relevant details. If something obvious is missing, like the odometer reading, be cautious. Look at the year, make, model and trim of the vehicle and find out what the car is worth on Kelly Blue Book (KBB). While you shouldn’t pay more than the KBB value of a car, one that’s priced a lot lower could be a red flag.
   
   
5. Call the seller: Ask the seller about the car’s history—how many owners has the car had and do they have the service records? Ask for a photo of the vehicle title (which is required to sell the car) and the vehicle identification number, or VIN. Use the VIN to do a title search to find out if the car has been in a major accident and if there’s still an outstanding lien (loan). And finally, you can learn a lot about the situation by the way the seller speaks: Are they vague with details, do they use buzzwords that don’t tell you much about the car, or are they inconsistent or contradictory?
   
   
6. Meet in person:
   • You’ll want to look over the car in person before you buy it. Assuming the car is drivable, ask to meet during the day in a public place like the parking lot of a large store. There are also “safety exchange zones” at many police and sheriff station parking lots designed for this kind of sale.
   • The first thing you should do is ask to look at the title, sometimes referred to as a pink slip. Make sure the name on it matches the seller’s driver’s license so you know they’re the rightful owner. Also, check that the VIN on the title matches the one on the car. If anything doesn’t match up, be prepared to walk away.
   •  Do a visual inspection of the car and then take it for a test drive. If you notice any performance issues that you haven’t already talked about, take it to a mechanic. An inspection could cost $100-200, but it could save you a lot more in the end.
      
7. Negotiate: Use the KBB value and prices you’ve found for comparable cars during your search to make a fair offer. If you’re unsure where to start, consider asking the seller what their best price is and go from there.
   
   
8. Final purchase & title: If everything is going OK and you’re ready to buy the car, then make plans to exchange money for the vehicle, title and a bill of sale. Don’t bring your money to the first meeting, instead, ask the seller to meet you at the DMV or at your bank. Banks usually have staff available who can notarize a bill of sale and title (some states require this step before a title can be transferred.)
   
   
9. Driving away: You’re about ready to jump behind the wheel of your new car, but before you do, make sure you set up your auto insurance. Most insurance companies will let you add or change coverage over the phone or through their app or website. You’ll need to show insurance when you register the car at the DMV. Transferring the title at the DMV is the last part of the process and the final step in making the car legally yours.

Tips to keep yourself safe from scammers:

Just like buying a car from a dealership, your best strategy should be to walk away if you are unsure about the sale. It’s perhaps one of the most difficult parts of shopping but try not to get emotionally attached. That will make it easier to pass on a sale if something doesn’t feel right.
 

Here are a few more red flags to keep in mind as you shop:

• Don’t bargain over email, do not negotiate sight unseen and never send any money electronically.
  
  
• Be wary of strange requests. For example, if the seller wants to verify your identity by texting you a code, or asking for your personal information, etc.
  
  
• Get the VIN from the seller before you look at the car. Then run a free vehicle history report or pay for a more detailed report from a third-party company like Carfax or AutoCheck.
  
  
• Be aware of title issues: 
  • Make sure the title is in the name of the seller.
  • Do a title search to make sure there is no lien on the car. You can’t transfer the title until the loan on the car is paid off. So, if you buy a car with a lien on it, you might get stuck paying off someone else’s loan.
  • Most people don’t want to buy a car with a salvage title. But it may be OK if you know what kind of damage it has had and are comfortable with the repairs.
     
• When meeting up to inspect the car and negotiate the price, meet at a public place. If you're looking at a car that doesn’t run, and you need to go to the seller's home, go during the day and bring a friend with you.
  
  
• Don’t bring money to your first meeting but be prepared to purchase quickly. For your second meeting, consider making the sale at your bank where you can also get the receipt and title notarized or consider doing the transaction at the DMV so you can transfer the title on the spot.
  
  
• Make sure to get a bill of sale, even if it’s just scribbled on a piece of paper.
  
  
• Have an insurance company ready ahead of time so you can insure the car right away.
  
  
• When inspecting the car, ask about the bigger maintenance items like the timing belt, brakes and transmission. And look at the tire tread. You don't want to spend $2-3k for a car that will need a few thousand more to keep it running.
  
  
• Take the car to an independent mechanic and have them do a buyer's inspection. Don’t go to the mechanic the seller goes to.
  
  
• Also, check to see if your state requires the car to pass a smog test prior to being sold. In California, the seller must get a smog check 90 days prior to selling an older car.

Buying a used car is a great way to save some money. And looking at a private sale can be a good option as long as you know what to expect.

Are you’re ready to find your next ride? Learn more about our personal loan as a possible lending option if you're working with a private seller to purchase a vehicle.