Buying a car from a private seller could be a easy way cut costs. A person-to-person transaction means coping with more paperwork and could turn it into a bit more difficult to obtain financing, but it could still be a terrific way to buy a used car.
Advantages and Disadvantages of Buying an automobile From the Private Seller
You'll be thinking about all the benefits and drawbacks of buying a second hand car from the private party before you proceed. In some instances, you might be best looking for a preowned car in a dealership, specifically if you want a warranty. However, working with a private party has its own benefits too.
Advantages
- Potential in order to save money: You might be able to get a better price from a private party. Sellers may not know their car's true value, or might be in a hurry to sell their car. Additionally they don't have to charge more to cover expenses that include managing a dealership.
- Room to negotiate: If you wish to negotiate (and you likely should), there might be more flexibility on the price when you're handling a private seller. In the end, a private seller do not possess a boss leaning in it to make a profitable sale. You also likely will not be faced off against someone who has frequent experience negotiating car sales.
- Less pressure: Another advantage of avoiding salespeople—you don't have to worry about someone attempting to upsell you additional products or services.
Disadvantages
- Fewer guarantees: Dealerships may be bound by state and federal laws that offer some protections and guarantees to buyers. However, private party sales are “as-is,” meaning you will possibly not have any recourse if the car doesn't perform as promised.
- Extra paperwork: A dealership may take on the responsibility of registering the automobile in your name and transferring the title, whereas you will need to handle that yourself inside a private transaction.
Secure Your Financing
If you really can afford to purchase a second hand car with cash, which may be the easiest method to save money and simplify the procedure. However, some lenders offer private party auto loans if you need financing. Overall, about one-third of used vehicles were purchased with financing as of the third quarter of 2022, based on Experian Automotive Industry Insights.
Before you apply for financing, you may want to look at your credit. Credit history all three credit agencies (Experian, TransUnion and Equifax) are available at AnnualCreditReport.com. And, you will get your Experian credit report along with your credit ratings for free through Experian. Without having a favorable credit record, it might be hard to be eligible for a financing with favorable terms. If so, you might want to rethink your timeline and budget and concentrate on improving your credit first or locate a car you can afford to purchase using the cash you have available.
If you think your credit is good enough to qualify you for affordable financing, look for lenders that offer private party automotive loans, which is something not all lenders do. The rates, terms as well as can vary with respect to the lender, so shopping for a loan is a vital step in finding the right deal.
Depending on the lender, you may also need to have a car picked out before applying for financing. However, you are able to sometimes get preapproved for an auto loan if you haven't selected a specific car yet.
When you're applying for a car loan, you can have a strategic approach by submitting all your applications within a 14-day window. Trying to get a car loan leads to a hard inquiry to become added to your credit report, which may hurt your credit scores. However, credit rating models count multiple car loan inquiries like a single inquiry for scoring purposes if they happen during a short period.
Find Your Car
From asking family and friends to searching on the internet, there are many methods to interact with private party sellers. Ebay are two popular marketplace sites for private party car sales, and there are car-specific sites, such as Cars.com.
As you conduct your search, you may also use sites like Edmunds, Kelly Blue Book (KBB) and Consumer Reports to research models and makes you come across. Specially when buying a used car, you'll want to consider the model's long-term reliability and average maintenance and repair prices.
These sites offer an estimated worth of used vehicles according to factors including make, model and condition. They are able to help you determine if you would be getting a great deal in the private seller—or if there's room to negotiate.
Pay Attention to the Vehicle History Report
Once you've found the vehicle you need to buy, you will want to take a look at its vehicle history report, also known as a vehicle identification number (VIN) report. You can get some basic information having a free VIN check:
- Safercar.gov to ascertain if there has been any recalls on the model and whether the specific car continues to be repaired or upgraded.
- National Insurance Crime Bureau to check if the automobile was reported stolen and not recovered, or if it features a salvage title.
A paid VIN report provides you with more details about the vehicle you're looking at. You can learn about its service history, ownership history and be it ever been within an accident or stolen. AutoCheck (operated by Experian) and Carfax are two popular VIN report providers. Compare the are accountable to the seller's description and look for discrepancies that could be a warning sign.
If you're seriously interested in purchasing the car, you will also want to take a try out and potentially have a mechanic perform a pre-purchase inspection. You'll likely have to pay for the inspection, which might run around $100 to $200, but it's normally a worthwhile investment as trusted mechanics and technicians can give you the all-clear—or warn you about needed repairs or maintenance.
There are mobile inspection services that will come to you, or you can locate a local shop. Dealing with someone who focuses on the specific type of car could be a good idea, as they can also tell you about common issues that owners experience.
Finalize the offer
Once you're certain you need to purchase the car, you are able to negotiate the final price and make the acquisition.
Change the Ownership of a Used Car
The details based on how you legally change ownership documents for that car rely on which state you are in, whether you're financing the purchase and if the seller still owes money on the vehicle.
AAA offers an overview of the title transfer process in every state on their website. Additionally you can contact your state's motor vehicles department or visit its web site to find out what documents are essential and what the procedure will look like. Your lender, if you're one, might be able to help too.
Get Insured
You also can't legally drive an automobile until you have insurance or some other proof of financial responsibility. You can include the brand new car for your current policy for those who have one or buy auto insurance for your new car. In either case, you might make use of this opportunity being an opportunity to get quotes from the 3 insurers to see who provides you with the best deal. If you're financing the purchase, you should check using the lender to determine which kind of insurance you need to buy.
Watch Out for Private Seller Scams
You might be excited to buy a new car while avoiding an agreement, but you should also look out for scams. Scams can take different forms, but some common ones to take into consideration include:
- Title washing: Even if it can run right now, you might want to avoid a car which has had significant damage that resulted in a salvage title. Sellers may try to “wash” the title by registering it in a new state. A VIN report can help reveal the car's true history.
- Curbstoning: Curbstoning describes when a dealership pretends to be a private party selling a car, and it's illegal in lots of states. The seller might be offloading vehicles that have liens, bad titles or aren't safe to drive.
- Fake escrow accounts: Selling real estate may not let you see the vehicle and tell you there's lots of demand or they're in a hurry to market. They'll then ask you to send the money to some third-party escrow account to “place a hold” around the car or purchase it for delivery. The truth is, however, they control the account and just bring your money once the transfer is complete.
- Fake guarantees: Sellers could also attempt to push a deal forward by suggesting that there's a guarantee from whichever payment platform you utilize, which might not really be the case. Some platforms do offer a level of protection, so be sure you understand your rights as a consumer before you agree to anything.
In general, it's best to avoid:
- Sellers who say they're in a hurry to sell a car for under it's worth because of a health issue, move, military deployment or any other “emergency.” Scam artists tend to increase the time pressure so you have a lesser chance to think through the decision.
- Sellers who request you have to pay them with gift certificates, reloadable prepaid cards or wire transfers.
- Sellers who won't meet you personally or let you come with an independent mechanic or technician inspect the vehicle.
While it can save you money by purchasing a used car from a private seller rather than a dealership, set realistic expectations and don't let selling real estate pressure you into sending money. As with many major purchases, if your deal seems too good to be true, it's best to move on.