In a Nutshell
If you want to save money and avoid working with a car dealership, buying a used car from a private seller might be a good option. But it’s important to do your homework before making a purchase — it can help ensure you pay a fair price and don’t end up with a lemon.If you’re in the market for a used car, buying a car from a private seller could be less expensive than buying a used car from a dealership — but it can come with some risks.
You might pay less buying from private sellers because they don’t have to meet dealership-set expectations for profit. This can leave more room for negotiation.
But with a private sale, you’ll also have to handle all of the paperwork associated with the sale and transfer of ownership yourself. You also won’t have access to dealer financing and some of the protections that consumers may get when buying a car from a dealership. For example, private car sales may not come with warranties, depending on your agreement with the seller.
And if you live in a state where the lemon law applies only to new cars (and you don’t have any kind of similar protections in your agreement with the seller), you could be out of luck if the car becomes undriveable after you buy it.
If you decide to skip the dealership and buy a car from a private seller, here are a few tips that could help protect you during the car-buying process.
- Research cars for sale in your area
- Gather information about the car
- Take a test drive
- Get the car inspected
- Shop around for financing
- Negotiate the sale and close the deal
Research cars for sale in your area
If you plan to buy a car from a private seller, you can’t just drive up to a lot and choose from hundreds of cars the way you might if you buy from a dealer. But there are plenty of resources available to help you with your used-car search — you can browse local private-sale inventory on websites like Autotrader or Craigslist, or check classified ads in your neighborhood.
When you find a car you’re interested in, compare the seller’s asking price to the Kelley Blue Book or Edmunds private-party value. Understanding the fair market value of different makes and models can help you figure out whether the seller’s asking price seems fair compared to similar vehicles in your area, giving you info that can help in your negotiations with the seller.
Gather information about the car
Getting as much information as you can about a vehicle can help you make an informed decision. Here are a few ways to learn more about a car you may want to buy.
Get a vehicle history report
For a fee that can range from $10 to $40, you can order a vehicle history report that might help alert you to potential problems with the car. This report contains information including accident history, damage the car has sustained, open recalls, title history, lien history and service history.
You can use the car’s vehicle identification number (VIN) or license plate number to get a vehicle history report from websites like Carfax, instaVIN.com and AutoCheck. But keep in mind there may be incidents in the car’s history that don’t show up on these reports. Don’t rely solely on the report for all the information you need.
Request service records
Car manufacturers typically recommend regular maintenance to keep vehicles running well. Ask the seller to show you the car’s maintenance records. Not all sellers will have these, but if they do, the records can provide insight into how well the car has been kept up.
Ask the seller questions
The seller may be able to tell you things that don’t show up on the vehicle history report. Or there may be a discrepancy between what they tell you and what the report shows, which could be a red flag.
Before you agree to buy a car, here are some questions to consider asking the seller.
- Are you the original owner? If not, it may be tough to find out how well the car was maintained before the current seller bought it.
- Are there any liens on the car? An auto lien is a notice attached to the vehicle by a creditor who claims to be owed money — one example of this situation could be that the owner put the car up as collateral for a loan that has not been paid off. Lien info may show up on the vehicle history report. If not, in some states, you can check the status of a lien online at your state’s Department of Motor Vehicles by entering the VIN. If there’s a lien on the vehicle because the seller still owes money on a car loan, the seller may need to pay off that loan before the title can be assigned to you.
- Has the car been in an accident? The car may have been in an accident that doesn’t show up on the vehicle history report. Compare what the seller tells you with what’s included in the report.
- Have there been any recalls on the car? If the answer is yes, check that all necessary repairs have been completed. You can search for recalls on your vehicle through the National Highway Traffic Safety Administration.
- Have there been any major repairs? Accidents aren’t the only reason a car may undergo major repairs. If it has a new engine, transmission or a tree has fallen on top of it, you’ll want to know.
- Why are you selling it? Maybe the kids have grown up and moved out, so the seller no longer needs that SUV. Or maybe they just want a newer car with special features. If they can’t give you a good reason, the seller may be trying to hide problems they’re having with the car.
- How many miles are on the car? If the mileage is unusually high or low based on the car’s age, find out why. Americans drive an average of 13,476 miles each year, according to the U.S. Department of Transportation.
Take a test drive
Getting behind the wheel gives you a chance to check for signs of obvious damage and get a feel for the car’s steering, suspension and brakes. During the test drive, listen for odd noises and make sure things like the heat, air conditioning, lights, windows, locks, turn signal and other features work. If anything feels or sounds off, get it checked out by a mechanic.
Get the car inspected
When you buy from a private seller, the car’s condition may be a bit of a wild card. You won’t know for sure the condition of the parts that aren’t visible or how well it’s been maintained unless you get it inspected. An inspection can alert you to potential mechanical issues and whether the car has been in an accident that wasn’t reported.
A pre-purchase inspection typically runs about $100 to $200, but that cost can be worth it to get a better idea of the car’s condition before you decide to buy it. Be sure the mechanic who conducts the inspection is someone you know and trust.
Shop around for financing
Unless you have enough cash to buy the car outright, you’ll need financing to cover the cost. Some banks and credit unions offer private-party auto loans, which are designed for consumers who are buying a car from a private seller instead of a dealership.
But keep in mind that not all banks and credit unions offer this type of loan. Among those that do, rates can vary from lender to lender, so take some time to shop around to find the best rate and loan term for you.
Negotiate the sale and close the deal
Once you’ve done your homework, you’ll have a better idea if the seller’s asking price is fair. If you feel it isn’t, you can use the information you’ve learned to negotiate a price you think is more reasonable.
After you agree on a price, the seller should sign the vehicle title over to you at the time of sale. If the seller still owes money on the car, you may need to make a check out to the lender in order to get the car’s title. You’ll then need to register the title in your name with your state’s Department of Motor Vehicles.
The documents you need to register the title in your name vary by state, but may include …
- The title showing it’s been signed over to you
- Bill of sale with the purchase price
- Odometer disclosure statement
- Lien information if you borrowed money to buy the car
- Lien release if the current title shows there’s a lien against it from the previous owner
After you file the necessary paperwork and pay any taxes and fees, you’ll receive either a paper or electronic version of the title.
Bottom line
Buying a car from a private seller can require a lot of work on your part. But if you don’t mind taking the time to research the car, you may be able to save yourself some money by skipping the dealership.
To make sure you don’t get taken for a ride by an unscrupulous seller, take the time to research the car you’re interested in buying, ask lots of questions, go for a test drive and get the car inspected by a mechanic before you complete the sale and drive away.