How to buy a car from a private party, not from a dealer
When you buy a used from a private party individual instead of a dealer, things are a little different in the buying process. It’s a good idea to take extra caution especially with regards to exchanging money and title.
Since an individual seller can’t arrange financing for you if you need a loan, as a dealer can, you’ll be responsible for getting your own financing at a bank or credit union, or at an online finance source.
What’s different when you buy a car from an individual?
Advantages of private car purchase from an individual
• Possibly better purchase price than dealer retail price
• Individual sellers tend to be more flexible on price and negotiating
• Individual sellers tend to be more agreeable to buyer inspections and test drives
• No sales tax (in some states) on private car sales
• Individual sellers tend to be more helpful on problem resolution
• Most sellers are honest, but you can’t always assume so
• Individual seller knows the car well and can provide history of car if he has been the only owner
• Many private sellers can provide documented service and repair histories
Possible problems when buying from an individual
Here are a few of the possible problems associated with buying a car from an individual private seller:
• Seller may not have title
• Car may be stolen or wrecked/repaired
• Seller has outstanding loan and does not have clear title
• Title is in someone’s else’s name – car doesn’t belong to seller
• Car has salvage title, or “washed” salvage title
• Seller misrepresents car’s condition and accident/repair history
• Seller might not be aware of hidden problems
• Seller misrepresents car’s year model or options list
• If buying online, car might not exist and seller is scam artist
Other than the possible problems listed above, other differences when buying a used car from an individual private seller, as compared to buying from a dealer, are:
• No sales tax is paid to private seller – buyer must pay sales tax at DMV (if taxable in your state) when the car is registered
• Private seller does not finance or arrange loans, as do most dealers – buyer must arrange own loan
• Private seller does not offer extended warranties or vehicle certification programs, as do some dealers
• Private seller does not handle paperwork with state DMV, as do many dealers – buyer must go to DMV to do paperwork
What you can do
• Never rely totally on a seller’s description of a car and it’s condition. Even though most sellers are honest, hidden problems may exist, unknown to seller. However some sellers are less than honest.
• Always get an independent inspection by a mechanic to look for hidden problems and maintenance issues. The small cost is worth it if it prevents you from making an expensive mistake.
• Get an AutoCheck® or Carfax® vehicle history report to make sure the make/model/year matches the car’s VIN (Vehicle Identification Number) and that the car has not been wrecked or salvaged (totaled) in the past.
• Never buy a used car for which the seller has no title (“it got lost” or “the guy I bought if from never gave me a title”). The car might be stolen, or the seller is trying to sell a car that belongs to someone else.
• Always get a clear title (no loans or liens) from the private seller at the same time as your give him money. Accept no promises of a title being given to you at a later date.
• Make sure the title has the seller’s name on it and the VIN matches the VIN in the front window of the car.
• Have the individual seller sign over the title to you immediately. Take the title to your state DMV office and get a new title and new registration – and pay sales tax (in most states).
• Although not absolutely necessary, it is a good idea to write a simple Bill of Sale, as proof of sale and purchase. Simply state the description of the vehicle, year/make/model/VIN and mileage. Specify the sale price, buyer’s and seller’s names, signatures, addresses, and date of sale. Buyer and seller each get a copy. As a buyer, keep the Bill of Sale with you in the car that proves you own the vehicle, until you have a new registration and tags.
If you need a used car loan and have no credit, or poor credit, we recommend CarsDirect as one of the best companies specializing in sub-prime car loans. Also get free loan quotes from another reputable online company, Auto Credit Express. You are not obligated to accept any loan offer.
Of course, if you don’t know your latest credit score, you should. Get your Experian Credit Report FREE at freecreditreport.com.
• If the car has a salvage title, it means it has been wrecked or otherwise “totaled” by an insurance company in the past. The car might be fine after repairs but its value has been diminished. Salvaged cars are worth less even after repairs. Individual sellers are often not aware that a car has been salvaged in the past. A previously salvaged car can get a “washed” title in a state that does not have salvage titles.
• Always check a car’s sale value at kbb.com or nadaguides.com to make sure you are paying a fair price. Negotiate the price down if the car has high mileage, excessive wear, damages, or equipment that doesn’t work.
• Call your insurance company right away to get your car covered
• If buying cars online, understand that buying a used car long-distance is more risky than buying a car locally that you can see, inspect, and test drive. eBay is relatively safe because of their buyer protection programs, some are free and other parts cost you extra money. Other sites such as Craigslist must be used with additional caution because of “sellers” who are in fact scammers (see Car Seller Scam).
• Remember that used-car sales by private individual sellers are “as-is” without guarantees, warranties, or return rights. Lemon laws do not protect used-car buyers, only new-car buyers. There are no laws giving car buyers a “grace” period or “cooling off” time. If a buyer is unsatisfied or finds problems after the sale, the seller has no obligation to take the car back, pay for repairs, or provide other satisfaction that was not arranged before the sale.
You can buy car repair insurance (warranty) on your used car to protect you from the high cost of repairing problems and failing parts. It’s relatively cheap compared to the cost of repairs and replacement parts. Read more about it in our article, Car Repair Insurance.
If you decide that you won’t be buying a car from an individual private party, see our article, How to Find Cheap Cars for other ideas and sources of good cheap used cars.