Quick Facts about Buying a Car from a Private Seller
- Usually, buying from a private seller means the purchaser will pay less for the vehicle.
- Exchanging funds for the title involves risk for both parties unless you use a for-sale-by-owner marketplace like Private Seller Exchange.
- The buyer in a private-seller sale usually must register the vehicle and title in their name and pay the sales tax.
- Before buying any used car, the potential buyer should review a car history report.
So, you need a new vehicle and have decided that buying a used one makes the most sense. Congratulations. That’s one of the more significant decisions in the car-buying process. The next decision is nearly as substantial: Do you buy the used vehicle from a private seller or a dealer?
Advantages and disadvantages abound in peer-to-peer transactions. We will drill down in more detail and explain why a private-seller price may be lower, provide steps for buying this way, discuss safety factors to consider, and more.
- Pros of Buying a Used Car from a Private Seller?
- Cons of Buying a Used Car from a Private Seller?
- Why Private Sellers Can Offer Lower Prices
- Steps to Buying a Car from a Private Seller
- Private Seller Exchange: Simplifying Peer-to-Peer Car Sales
- Is Buying a Used Car from a Private Seller Worth It?
PRO TIP: You can avoid many hurdles and pitfalls of buying from a private seller by picking a vehicle in the Private Seller Exchange (PSX). We detail information about the service below.
Pros of Buying a Used Car from a Private Seller
When buying from an individual, you often spend less than with a car dealer transaction.
- Freedom of choice: If you are standing before a private seller negotiating a price, you have shopped around, researched, and picked a car you want. It’s been an unhurried, well-considered decision. In other words, you’ve been in control. When shopping at a dealership, you lose some of that control. You are dealing with a person who sells cars every day for a living. No matter how fairly the salesperson treats you, it’s not an even playing field. You are at a disadvantage.
- Lower transaction price: Whether buying from a dealer or an individual, the final price will be at whatever level you negotiate. In other words, receiving the lowest price possible is in your hands. Consequently, you need to know the book value of the car you hope to buy, which you can find using our valuation tool. Generally, buying from the seller eliminates the markup a middleman (the dealer) introduced. Theoretically, the private seller’s asking price will be lower than the dealer’s sticker. Any negotiation will begin with the asking price; therefore, the final transaction price should be lower with a private seller. Ultimately, though, it’s up to you.
- More bargaining power: In a perfect world, the individual seller’s asking price (negotiations starting point) will be lower than a dealer’s. However, that’s not your only advantage in reaching the lowest price. When you begin price negotiations, a private seller has already invested time and energy in you. If you can’t reach a compromise, the seller must start again with another potential buyer. That involves emails, phone calls, a test drive, etc. You have serious leverage. If you make a reasonable offer based on the vehicle’s value, which the seller rejects, don’t be afraid to walk away. It’s the seller’s loss.
- You can get your maintenance questions answered: You can ask the private seller why the car is for sale and get more details about the vehicle. You can ask as many questions about the car as you want, including maintenance and upkeep. Many times a vehicle history report will tell you some of these. But sometimes, it will not.
Cons of Buying a Used Car from a Private Seller
When buying peer-to-peer, you must invest more time, effort, and care. Here are some of the downsides when buying from a private seller.
- Many unknowns: The odds are a private seller is unknown to you. Consequently, there’s a certain lack of trust. Is the seller acting in good faith? Are there any hidden issues with the car that the seller is failing to share with you? Is there any danger in bringing a large amount of cash to the final transaction? Any method for exchanging funds for a vehicle with a private seller has downsides. These and other concerns are valid.
- No financing: Most dealerships can arrange to finance your purchase. That is, you can apply for financing at the dealership. Although we recommend securing financing before buying a used car at a dealership, the dealership usually does offer it. Unless the private seller is willing to carry the note (which has other red flags), there isn’t any financing available at the point of a peer-to-peer sale.
- Lack of consumer protections: The federal government has in place a regulation known as “The Used Car Rule.” It binds a used car dealership to several mandatory actions, such as not misrepresenting a used car’s condition and warranty status. Sadly, such regulations don’t apply to private sellers. Purchasing from a private seller means buying the car as is with any issues or problems it has. Any verbal promises a private seller makes aren’t enforceable.
- Takes more time: All things equal, buying a car from a private seller will consume more time than buying from a dealer. How much time depends on how meticulous you are in vetting the vehicle. No matter what, you must talk to whoever offers the car and travel somewhere to see and test drive it. This can take longer with a private seller because you must agree on times and safe places, which may be inconvenient. If you can’t pay cash, you must arrange financing with a third-party lender. If you are using a cashier’s check as payment, you must go to your bank to have it issued. When the deal is done, you must obtain the title and go to your local DMV office to transfer the title and pay the sales tax. Tick-tock, tick-tock.
- Paperwork: When buying from a dealer, the dealer handles the title transfer, registration, and collection of the appropriate sales taxes. However, in a peer-to-peer sale, transferring the title, registering the vehicle, and paying the sales tax falls to the buyer.
- Vehicle history report: Likely, a private seller hasn’t invested in a car history report like AutoCheck or Carfax. Many higher-volume dealers will supply this report. You shouldn’t buy a used car without one. Consequently, you’ll need to order and pay for the report to review any vehicle accident history and maintenance performed.
- No warranty: Unless the used vehicle you’ve picked is still covered under the factory new car warranty, there is no warranty. Many dealer-backed warranties offer only a minimum of coverage. They provide some protection, only if the dealer backs them up. A private seller can’t issue a warranty or guarantee of any sort that is enforceable. In other words, in a private sale, once you pay for a car and drive it away, any issues that pop up are your responsibility. This creates a level of financial risk to you, the buyer if something goes wrong, even if it’s on the drive home.
Why Private Sellers Can Offer Lower Prices
Buyers of used cars can often save hundreds, if not thousands, of dollars by purchasing a vehicle from a private party. Here is why:
- Individuals may sell a vehicle after a dealership offers a low trade-in value.
- Private parties may sell a vehicle because they need money for something else.
- Private owners may sell a vehicle because it is no longer needed or because its owner has moved or passed away.
- Private parties may sell a vehicle after a dealership rejects it as a trade-in.
- Private owners may sell a vehicle because there is something wrong with it, and they don’t want to spend the cash to repair it.
Steps to Buying a Car from a Private Seller
Every used car purchase is different. This statement is even more true when buying peer-to-peer. Consequently, we can’t anticipate every oddity that you may encounter. However, we can provide you with a preview of the process in general. Here is the typical progression of events in a peer-to-peer sales process.
1. Create a Budget
With inflation remaining stubborn and the overall economy contracting, taking inventory of your income versus your expenses is more important than ever. To estimate what you can afford, you must itemize your monthly spending from the cost of your housing to movie nights. How much do you spend monthly, and how much is left over for savings and car expenses?
TIP: Your car expense isn’t just the monthly loan payment and average monthly fuel costs; it includes car insurance, scheduled maintenance, and other related expenses. Use Autotrader’s monthly car payment calculator to factor in all your costs. If you’re on a limited budget, try searching for an affordable car for sale from a private seller.
Cars for Sale by Owner under $5,000
Cars for Sale by Owner under $10,000
Cars for Sale by Owner under $15,000
2. Find Cars Offered by Private Sellers
There are various ways to locate inventories of vehicles offered by private sellers. For example, classified ads, neighborhood chat boards, and consumer automotive websites like Autotrader are solid sources. If you narrow your choice to a specific model, consumer websites are tailored to provide options by make, model, and year. Furthermore, you can often use such sites to research the particular vehicles you pick.
3. Contact the Seller
Once you have found a likely candidate and researched it, it’s time to contact the seller. This is the moment to ensure that the seller has a free-and-clear title. The entire transaction and transfer process is more involved if the vehicle has an outstanding loan balance. If you haven’t seen many photos of the car, ask the seller to snap more pictures with a cell phone and text them. This is also the time to ask questions about the car and the buying process. Among the questions, always ask:
- What form of payment does the seller require?
- Is the seller the original owner?
- Has the vehicle been in any accidents or had any major repairs?
- Why is the owner selling the car?
4. Inspection and Test Drive
If the seller answered your questions to your satisfaction, it’s time to set up an appointment to see and test drive the car. Remember earlier when we discussed unknowns? Meeting with a stranger is one of them. Insist on meeting at a public place like a local police department and take an adult relative or friend with you. Not only will it add a layer of security to the meeting, but your tag-along can also help spot things you may miss during the inspection and test drive. Ask the seller to supply their maintenance records if they keep them. Meet during daylight hours.
5. Schedule a Professional Inspection
We urge you to consider a third-party professional inspection if the vehicle passes the test drive. Such an inspection may not find every issue, but it can detect many common problems. The cost will probably be between $100 and $150. There are even services that will go to the vehicle. Explain to the seller you want the peace of mind of a professional inspection. You can then arrange with the seller to meet at a local service center or mechanic. Or enlist a visiting inspection service to plan with the owner for a site visit.
6. Negotiate the Transaction Price
You can negotiate the selling price now that you are familiar with your target car. Moreover, you now know the car’s actual condition and can get a more accurate value. The private-seller value is expressed as a range. You aim to negotiate a price close to the lower number in that range. If some glaring issues need repairing or replacing, you can try to negotiate the price down based on the cost.
7. Provide the Form of Payment
How you provide payment is really up to the seller; however, you must be comfortable with the form of payment. Therefore, there is always room for discussion. Suggest a compromise if you aren’t at ease with carrying around several thousand or even several hundred dollars to the transaction. Below are the common forms of peer-to-peer payment options. None are perfect, and there are always safety concerns, including fraud. But you and the seller must agree on at least one.
- Cash
- Certified check
- Cashier’s check
- Bank transfer
- Escrow
- Digital payment platforms
8. Obtain the Paperwork
The seller must transfer the vehicle’s title to the buyer to complete the transaction. As the buyer, ensure that the seller’s portion of the title is completed along with the required information like the VIN, current odometer reading, etc. In peer-to-peer transactions, some states also require a bill of sale. Check with your state’s motor vehicle or revenue department to determine if a bill of sale is needed to transfer the title, register the car, or pay the sales tax.
Private Seller Exchange: Simplifying Peer-to-Peer Car Sales
If you wanted to avoid all the pitfalls and drawbacks of buying from a private seller, you probably couldn’t dream up a better solution than Autotrader’s Private Seller Exchange (PSX).
The marketplace enables you to buy a used car from a private individual without the safety concerns, inconveniences, or other time-consuming issues usually associated with peer-to-peer sales.
PSX safely handles every aspect of the process, including:
- Verifying the seller.
- Providing a car history report.
- Arranging the test drive.
- Access to inspection services.
- Securing the payment.
- Ensuring a clean title.
- Handling the title transfer
In other words, PSX is a one-stop peer-to-peer sales facilitator providing as many or as few services as you may require.
Is Buying a Car from a Private Seller Worth It?
There are solid advantages to buying from a private seller that can make the risks worth it, especially if you are a cash buyer. However, even with dedicated due diligence, such as a vehicle history report and a professional inspection, there are plenty of ways for a peer-to-peer transaction to go wrong. Another layer of safeguards protecting buyer and seller alike can be found in services like Autotrader’s Private Seller Exchange that serve as a trusted broker between buyer and seller, minimizing the risk.
Editor’s Note: This article has been updated for accuracy since it was initially published. Christian Wardlaw contributed to this report.
Is it possible to buy a car from a private party on Autotrader?
private car sales do they exist ? I can not find any.
WERE IS THE PRITE PARTY CARS FOR SALE
seller tells me 48 hrs he did not answer phone in that time
how much time do you have after purchasing vehicle and does not pass smog
how much time do you have after purchasing vehicle and does not pass smog