How to Exchange Funds in Private Car Sales

Quick Tips on Exchange Funds in Private Car Sales

• Cash is easy and quick, but exchanging bundles of bills with strangers can be risky. 
• Checks aren’t foolproof; even certified and cashier’s checks can be counterfeit.
• A full-service platform like Autotrader’s Private Seller Exchange is a third party providing many benefits, including guaranteeing the integrity of the money transfer.

Privately selling or buying a car (peer-to-peer) can be a stressful experience, especially for first-timers. Even for those more experienced in the private marketplace, though, there is always a degree of uncertainty. Topping the list of worries is exchanging funds in peer-to-peer car sales. Without taking certain precautions, it is nothing short of a leap of faith.

According to Autotrader’s parent company, Cox Automotive, nearly 19 million vehicles are sold peer-to-peer per year. Historically, there have been six primary methods for fulfilling a peer-to-peer car transaction. Each has advantages and disadvantages, including speed, security, cost, availability, etc. Although these traditional methods facilitate the transaction, they end there.

If you are the seller, you are on your own setting the price, marketing your car, verifying the payment, and any other tasks involved in moving the iron. It’s the buyer’s responsibility to verify the legitimacy of the title and transfer it, arrange any financing, and so forth.

If you are thinking about selling a car on your own, you should familiarize yourself with the various payment options, which now include a seventh option: the Autotrader Private Seller Exchange (PSX). It’s a new, safer, full-service platform for peer-to-peer car transactions that’s fully accessible on a smartphone.

Continue reading, and we will detail all seven transaction options and highlight the main strengths and weaknesses.

• Cash
• Certified Check
• Cashier’s Check
• Bank Transfer
• Escrow Service
• Digital Payment Platforms
• Private Seller Exchange

Cash

There’s no question about it; cash is easy and quick. Not only does it satisfy the instant gratification of profit from selling a vehicle, it immediately puts the buyer behind the wheel. It also ensures privacy because no other person or entity is involved. However, exchanging cash between relative strangers poses a degree of risk.

Major Advantage: Speed.

Major Disadvantage: High amount of risk.

Certified Check

To certify a personal check, you simply take it to your bank, which verifies adequate funds are in your account. It marks the check as certified and holds those funds exclusively for payment of that check. In other words, it guarantees the account balance will cover the check when presented for payment. Because payment is guaranteed, the seller’s bank usually treats it as cash when deposited, providing immediate access to the funds. Other banks may process the payment as a regular check, delaying the seller’s access to the funds.

Fraud is still possible because the certification can be forged. Therefore, the seller should verify the check with the issuing bank before releasing the title or the car. Your bank may or may not charge a fee for certification. In general, we advise sellers to avoid certified checks because of the possibility of fraud and the potential for delayed payment.

Major Advantage: Physically safer than cash.

Major Disadvantage: Fraud is a possibility.

Cashier’s Check

Where a certified check is drawn on an individual’s account, a cashier’s check is drawn from the bank’s funds. In essence, the car buyer purchases this guaranteed check from the bank by giving the bank the funds to cover the payment and a transaction fee. The bank then issues the cashier’s check from its account. Issued and guaranteed by the bank, a cashier’s check is more secure than a certified check. Moreover, other financial institutions consider a cashier’s check as cleared funds. Most banks charge a nominal fee (often $20 or less) for issuing a cashier’s check.

Sellers should remain aware that unscrupulous “buyers” can create counterfeit checks. It’s likely inconvenient, but meeting the buyer at their bank to see them obtain the cashier’s check will be worth the hassle.

Major Advantage: Other banks treat cashier’s checks as cash.

Major Disadvantage: No check is foolproof.

What’s the Difference Between a Check and a Certified Check?

A certified check is written on an individual’s account, while a cashier’s check is written on a bank’s own account. For a personal check to be certified, the bank must verify the funds are in your account, set them aside, and then mark the check as certified. That assures other banks the check is good. To get a cashier’s check, you must give the bank cash in the amount of the check and any required fees. The bank then issues a check for the agreed amount from its own account. Other financial institutions treat a cashier’s check as if it is cash.

Bank Transfer

Using a bank transfer removes fraud concerns and ensures a safe transfer of funds during a car sales transaction. That’s because it becomes an exchange between the buyer’s and the seller’s banks. There isn’t cash that can be stolen or checks that can be forged. The buyer transfers money from an account in their bank to the seller’s account. The downside is that bank transfers might take 24 hours or more and have a fee of up to $50.

Major Advantage: Trustworthy and secure funds transfer.

Major Disadvantage: It can take 24 hours or longer.

Escrow Service

If you’ve ever purchased a home, you probably have encountered the term escrow or escrow account. Regarding a car transaction, an escrow service is a third-party repository for holding the funds the buyer pays until the vehicle exchange is complete. At that point, it releases the funds to the seller. If the sale somehow goes wrong, both parties are protected. The escrow service returns the funds to the buyer.

With the introduction of a neutral third party, both buyer and seller enjoy a degree of added security and a paper trail. On the downside, escrow services tend to slow down the process because the payment takes time to verify and process. Moreover, the escrow fee can be as much as 2% of the sale price. In other words, the higher the transaction price, the larger the fee.

Major Advantage: High degree of security.

Major Disadvantage: Potentially costly fee.

Digital Payment Platforms

Growing in popularity, digital payment platforms like Venmo, PayPal, and Zelle provide a degree of convenience some other forms of payment lack. Furthermore, they are quick and secure. However, they can have transfer limits. Moreover, each platform requires both the buyer and seller to have verified accounts. Also, the fees can be steep for purchase transactions. For example, Venmo charges sellers 1.9% of the transaction.

Major Advantage: Convenience.

Major Disadvantage: Both parties must have verified accounts.

RELATED: Can You Buy a Car With a Credit Card?

What is Private Seller Exchange?

Autotrader’s Private Seller Exchange is an industry-first peer-to-peer vehicle-buying marketplace where consumers can buy and sell cars with safe, secure transactions while taking advantage of a wide range of popular services. Peer-to-peer indicates buyers and sellers who are private individuals, rather than one or both being a car dealer.

If you rolled all the major advantages listed above into a single peer-to-peer transaction model, you might arrive at something very similar to the Private Seller Exchange. It lets you buy directly from a private seller without sacrificing security, convenience, or quickness. PSX is a secure marketplace where both seller and buyer build a bridge of trust through investigation, verification, communication, and transaction, expedited and validated by PSX.

Unlike other peer-to-peer transaction options, PSX not only acts as a third party but also guarantees the integrity of the money transfer. It also provides various other vital services benefiting buyers and sellers from the beginning to the end of the process. Think of PSX as a full-service facilitator offering solutions to the issues that face buyers and sellers in peer-to-peer car transactions. It’s a cafeteria platform; buyers and sellers can pick and choose from the available services from the comfort of their homes through a smartphone.

Sellers must register, providing information about the vehicle they want to sell. The fee will be no more than $99 or 0.99% of the final transaction price, whichever is greater. Buyers merely need to pick a car from the inventory at the Private Seller Exchange Used Cars for Sale by Owner.

Seller Services Include:

• Exposure to thousands of car shoppers.
• Pricing guidance.
• Easy scheduling of test drives.
• Top dollar for the vehicle.
• Secure, fraud-free payment.
• No-hassle title transfer.

Buyer Services Include:

• A huge inventory of available vehicles.
• One-on-one access to the seller.
• Private-party pricing.
• Help with arranging test drives.
• Access to inspection services.
• Payment facilitation.
• Seamless and secure title transfer.
• Lien-free title.
• Available gap insurance.
• Warranty marketplace.

Peer-to-peer car transactions have never been easier or more secure. There are no trips to the bank or the DMV and everything except for a test drive can be accomplished on your personal device.

Editor’s Note: This article has been updated since its initial publication.