Updated: May 20, 2024
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There are various factors to consider when purchasing a car, including the type of car, cost and where to shop. For many, buying from a private seller is the right option and helps get an affordable vehicle quickly. However, there can be risks.
It’s important to weigh the pros and cons to ensure this is your best choice. Knowing the steps you need to take before, during and after the transaction can also help you find the best car for your needs and minimize the risks.
Car Buying Facts and Statistics
Buying a car from a private seller may not always be ideal. Here are some facts and statistics that may help you make an informed decision.
There were approximately 53,624,000 new and used vehicles sold in the United States in 2019. The average price of those vehicles was $29,302.
The most important factors buyers should consider before purchasing a vehicle from a private seller are price, financing options, vehicle history, title and car condition.
Buyers should conduct due diligence to avoid falling victim to common scams, including title washing, fake escrow, curbstoning, guaranteed payment and odometer tampering.
The best-selling used car in the U.S. in 2022 was the Ford F-150, accounting for 3.3% of total sales.
You can purchase a car from a car dealership or a private seller. Choosing the latter means transacting with an individual. This is ideal for those looking for more affordable used vehicles. Since you’re talking directly to the seller, negotiating may be easier.
However, dealing with a private seller also comes with disadvantages. There may be no dealer warranties and protections. You may also encounter dishonest sellers.
Weighing the potential benefits and drawbacks can help you determine whether buying a car from a private seller suits you and avoid making costly mistakes.
There are many ways purchasing a car from a private seller can be beneficial, including the following:
Potentially lower price
A private seller doesn’t have as many extra fees, unlike car dealerships who may invest more in on-site maintenance and cleaning.
More negotiating room
Private parties don’t typically sell cars daily, so they may not be as skilled as dealerships in negotiation.
Faster and more straightforward transaction
A private seller may need to close the deal quickly, depending on their situation. Once you both agree on a price, you can quickly move on to the next step and complete the title transfer.
More options
Buying from a private seller gives you more options as you can easily shop around and compare thousands of listings. You also have a bigger chance of getting a more well-maintained car.
Despite the advantages, there are also disadvantages you should be wary of. Below are some of them.
No dealer warranties
With private sales, you likely won’t get warranties. If you find a relatively new car, you may check if it still has existing warranties.
No lemon law protections
Buying from a car dealership means the lemon law protects you. The specifics of the regulation may vary per state, but it typically requires manufacturers to provide a refund or replacement should the new vehicle have a substantial defect that can’t be fixed. This may not apply to used cars, including those bought from private sellers.
Vehicle registration and documentation
You may need to work on the title transfer and car registration yourself.
Dealing with a stranger
Choosing to purchase from a private seller means you must risk dealing with someone you don’t know. While this might also be true if you purchase from a dealership, with private sellers it can be more difficult to check their reputation and credibility.
Overall, the process of purchasing a used car is not that different from buying a new model. You start by researching other vehicles and comparing prices. However, you may need to be more careful to avoid financial loss. Take note of important considerations, list relevant questions to ask the seller and be wary of common scams.
The right car for you is the one that best suits your needs and finances. Before buying a car, evaluate the situation first. Determine your financial preparedness. Know the risks and ensure the seller is the car's legal owner.
Loan options
Private sellers don’t offer financing options. That means you may need to pay upfront. You may have to apply for a loan if you don't have enough cash. Some financial institutions may offer auto loans for private sales. You may also consider a personal loan if you can't find any.
Due diligence
Private sellers are subject to less oversight. Therefore, you’re responsible for checking for red flags. Make sure the seller is the legal owner of the car. Ask for the title to see if they’re listed as the owner.
Refunds
Private sellers don’t need to return your money once the transaction is complete. You can’t change your mind and cancel the deal.
Finding the right private seller is also crucial. You have to make sure you’re dealing with a trustworthy individual. Although this may be challenging, you can start by asking them specific questions about the car.
Some dishonest individuals may target car buyers. When searching for the right car and seller, you must watch out for scams.
Some cars may be sold for salvage value. In such a case, the title must reflect this. Title washing occurs when the seller falsifies and alters the title to remove the salvage notation. Sellers may also do this by registering the car title in a new state. Make sure you conduct a vehicle identification check (VIN) to know the real history of the car.
This scam happens when a seller tells the buyer to send a deposit to a third-party escrow account. Typically, the seller advertises a below-market price to entice buyers. They’ll then ask the buyer to send payment to the account to reserve the car or buy it for delivery. Once the payment transfer is done, they’ll take the money. You’ll either get a broken car or no car at all.
Curbstoning happens when an unlicensed dealer tries to sell a car for more than it's worth. The curbstoner might pose as a legitimate private seller or dealership and use common advertising methods. They may alter a vehicle to hide critical problems, which can put a buyer in danger.
A seller may ask you to pay via a payment platform to get a used car guarantee from a third-party service provider. In reality, this guarantee isn’t authentic.
The seller may tamper with the odometer to lower the mileage. Tampering is often easier in older used cars.
You may need to disclose personal information when purchasing a car. However, some sellers may demand you disclose too much private information before you see the car. This is a red flag as it may indicate an attempt to steal your information. For example, if you’re dealing with a private seller, there’s no need to share your social security number.
If you’re 100% sure that buying a car from a private seller is the right option for you, your next step is to decide what type of car to purchase and where to get it. To avoid costly mistakes, it’s a good idea to conduct research first. Compare your options well. Review all relevant documents and make sure the vehicle is in good condition.
There are two things you need to determine. First, identify what car makes and models you would want to buy. Second, figure out how much you can afford.
Some people may start their search by listing several makes and models. They then shop around for vehicles available in their area. Others who are more flexible on the vehicle start with a budget in mind.
If you haven’t decided on the type of vehicle, you can begin your search by comparing several units. Consider customer reviews and safety ratings. You can use the safety ratings search tool of the National Highway Traffic Safety Administration.
Once you’ve decided on a listing, your next step is to contact the seller. Communicating with the seller will help you clarify details. Emails are easier to track and create documentation should you purchase. So unless the seller requests a phone call, reach out to them by email.
You would want to see the car's condition. Ask for a few shots from every angle, including the interior.
Get the VIN as well. You’ll need this to obtain the full history report of the car.
Don’t forget to check the car title to see if the seller is the vehicle's legal owner.
Set a time and place to examine the car. Check all sides. Look for scratches and dents. If possible, bring a mechanic with you for a more thorough inspection.
First, stay in the driver’s seat while it’s in park and idling. This will allow you to see if any of the major systems, such as air conditioning, windows, gauges and mirror adjustments, aren’t functioning correctly. Second, take the car for a spin. Drive around to see if the car is right for you or if there are broken parts.
If the test drive goes well, you can proceed with the negotiation. Clarify the price with the seller. You can try to bargain for a lower price.
Conduct a quick search of average transaction prices for a similar car in your area. Compare these with the seller’s asking price. This will help you see if you’re getting a good deal.
If you both agree with the purchase price, you can take the final steps. Finalize the transaction, which is best done in person.
If you’re paying in cash, meet up in or near the place where you’re getting the funds. This way, you avoid carrying large amounts of money in your pocket.
Once you finalize the deal, you’re assuming vehicle ownership. Ensure you have all the necessary paperwork, including the bill of sale, car title and emissions documents (if required).
Closing the deal doesn’t mean the end of the process. As a car owner, you have other responsibilities.
Once you have the car, you must have the right auto insurance coverage. You should also transfer the title and register the vehicle.
If you already have auto insurance, contact your carrier. Discuss with your agent the process of adding a newly purchased vehicle to an existing policy. You may also find these details on your insurer’s website.
If you don’t have car insurance yet, you must purchase a policy that meets the minimum coverage requirements in your state.
There are documents you need to complete when purchasing a car from a private party, including the car title and bill of sale. The title must reflect a change in ownership. That means you should be named the new owner. The bill of sale, on the other hand, should include your and the seller’s signatures. Depending on the state, you may also need an odometer disclosure statement.
Don’t forget to register the car in your name. The process varies per state, so contacting your local Department of Motor Vehicles (DMV) would be best.
The car's license plate will likely stay with the seller, and your car will not have a license plate. Generally, you can’t drive around without one. However, getting your permanent license plate may take a few days. To avoid issues, consider getting a temporary tag from your local DMV.
Finding the right resources can help you minimize the risks and maximize the benefits of buying a car from a private seller. MoneyGeek created a list of helpful guides and tools to help you find the best car for your needs.
About Nathan Paulus
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.
Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
