There’s a lot to consider when buying a used car. Beyond choosing the right model that fits both your needs and budget, you’ll need to find financing, and determine whether to shop at dealers or buy your car from a private seller.
Buying from an individual rather than from a car dealership has many advantages, though you'll want to do your homework before you buy. In this guide, we'll first talk through the advantages and disadvantages of buying from a private party, then walk step-by-step through the process of purchasing a private party pre-owned car.
1) Advantages of Buying From a Private Party
The biggest single advantage of buying a car from a private-party seller is a potentially lower price. Because individuals don’t have the overhead of a dealership, you can typically save a great deal of money. Private parties don't sell cars every day of the week, so they're less likely to be the skilled negotiators you'd find at a dealership. Simply put, the playing field between a private-party seller and a buyer will likely be more level.
Dealers have to pay staff to clean up cars and prepare them for sale. Private parties typically do so themselves, so those costs are not built-in to the price of the vehicle. Dealers may not have the urgency private parties have to sell, so they may not be as willing to negotiate.
While a dealer will spend time and effort trying to upsell you on costly add-ons, you don’t have to worry about that pressure when buying in a private sale.
2) Know the Disadvantages of Buying From a Private Seller
You’ll want to weigh the advantages of buying from a private party with a few disadvantages. When you buy from a dealer, a salesperson or finance officer will typically take care of all of the paperwork for the purchase, the registration, title transfer, and financing. You’ll never have to worry about helping the seller pay off their current loan. Of course, a dealership will typically charge for the services, though for many buyers the additional cost is worth it. A car dealer can also take care of your trade-in, and save you the hassle of selling your car yourself.
Auto dealers are typically required to comply with consumer protection laws and practices. Those protections don’t exist with private-seller transactions. Nearly every private-party sale is an as-is purchase with no warranty coverage, while you may be able to get some warranty coverage from a dealership. That’s especially true if you’re buying a certified used car, since certified models are only available from franchised new car dealerships. Many used car transactions are funded with financing arranged by an auto dealer. With a private-party purchase, you’ll have to arrange your own car loan.
3) Watch Out For Scams
When buying from a private party, there are a couple of scams you need to watch out for.
When an unlicensed dealer acts as if they're a private-party seller trying to sell their own vehicle, the act is called curbstoning. It is illegal in most states. In general, you don't want to buy a vehicle from a curbstoner. If they’re going to lie about their dealership status, they also may be lying about the cars they're selling.
There are a few ways you can identify a curbstoner. Whenever you call a seller, say you’re calling about “the car you advertised.” If they respond “which one,” you’ll have a good idea you’re dealing with a curbstoner who has several vehicles for sale. If the seller seems overly familiar with the buying, selling, titling, and registration process, it’s probably because they’ve done a lot of selling. Most private sellers don’t do it that often. You can also do a Google search on their name and phone number. If it shows up on several used car listings, you'll have a good idea they're a curbstoner.
When you buy and sell cars, there's quite a bit of personal information that needs to be shared. If, however, the seller demands a host of private information before letting you see the car, it should be a red flag. It may be an indication they are trying to steal your personal information, rather than selling you a car.
Even when you agree to a purchase, you should be wary of sharing personal information. While a lender may need your social security number, a car seller should not.
Most buyers of used cars should only consider buying a vehicle that has a clean title. You should never pay for a car unless the seller can immediately transfer the title to you. Unless you're fully aware of what you're getting into, you should avoid vehicles with branded titles. A branded title can indicate that the car was salvaged, flood-damaged, stolen and recovered, or used as a taxi or police car. If the seller says they do not have a title, they may be trying to hide the fact the car's original title is branded.
4) Get Your Financing First
When you’re planning on purchasing from a private seller, it’s critical you shop for a loan well before you plan to buy. Not only will you not have a dealer to help you arrange financing, but your lender may have extra hoops you have to jump through for a private-party purchase.
To save money on financing, you’ll want to shop for the right loan – just like you shop for the right car. The first step is finding lenders who make private-party auto loans, then applying for the maximum amount you think you might need for the purchase. You can always take less later, but you don’t want to have to reapply if you need more money than you budgeted.
Your auto loan will likely come from a bank, credit union, or finance company. All have their strengths and weaknesses, and all will require you to fill out a comprehensive loan application. They’ll use your loan application along with your credit score to determine whether they’re willing to give you a car loan, and what the terms of that car loan will be. In general, you want to have the shortest loan term possible, with a low interest rate and monthly payments you can afford.
Our guide to private-party auto loans will help you find the best loan for your purchase.
5) Find the Right Car
No matter where you buy your next vehicle – whether a private seller, dealer, or even an auction – you won’t ever get a good deal unless you get a good car. That means finding a used vehicle that fits your needs and is affordable to buy, operate, maintain, and insure.
Searching for the Right Model
A great way to find a car that fits your needs is by exploring our used car rankings and reviews. With our used car reviews, we seek to answer the questions used car buyers ask when they're in the market for a new ride. We look at ownership costs to help you find a vehicle that's not only easy to buy, but won't break your budget to own.
Once you’ve narrowed down your choices, it’s good to explore any online user groups devoted to that model. They can clue you in to features you might want and things that typically go wrong with the vehicle. If, for example, the owner's forums indicate the model has a history of transmission failures at 75,000 miles, you'll know to inquire about whether there has been transmission service performed on any vehicles you're considering. It can also be something you'll want your mechanic to pay special attention to on a pre-purchase inspection.
Be sure to check with your state to find out if sales taxes are charged on private sales. If they are, it's essential to include that cost in your budgeting.
Exploring the Marketplace
Finding a used car has never been easier. You don't need to scour classified ads line-by-line or troll parking lots looking for used cars. Online sites, such as Craigslist, allow you to search for the specific model you’re looking for. You'll want to cast your net into the broadest geographic area possible so you can find the best options.
Looking at dealer websites will give you an idea of what’s available and what prices local dealers are asking for. The amount you offer to a private-party seller should be significantly less than a dealer’s price.
Find Cars for Sale in Your Area
There’s no reason to look at every used car in the marketplace. Instead, you want to contact sellers by phone or email to start screening out cars you don’t want and narrowing the field to vehicles that deserve a second look. There are several questions to ask the seller at this point. Some are designed to get information about the car; others are to test the honesty of the seller by gathering information you can verify on the vehicle history report.
Here are some questions you’ll want to ask before you buy:
- Has the vehicle ever been in a collision?
- If so, where was the car repaired?
- Do you have service records I can inspect?
- Are you the original owner?
- What’s the car’s mileage, and is the odometer reading accurate?
- Why are you selling the car?
- Has the car ever needed major mechanical repairs?
- Who has been driving the car? Has it been driven by a teen driver?
- When was the car last inspected?
- What is the car’s title status?
- Do you still owe money on the vehicle?
- Do you have a vehicle history report I can read?
If you are satisfied with the answers you’re getting – and you need to use your sense of intuition a bit – it’s time to take the next step. For that, you’ll need the seller to give you the car’s vehicle identification number (VIN).
6) Examine The Vehicle History Report
A critical part of buying a used car is studying its vehicle history report. Some buyers will provide an AutoCheck or Carfax report, while others will require you to buy one on your own. If the seller provides the report, look for signs the document has been altered, such as inconsistent fonts or missing pages. Fortunately, companies such as Carfax and AutoCheck offer multi-report packages, so you don’t have to pay full price for each vehicle you’re considering.
You'll use the vehicle history report to see if there are any red flags in the vehicle's past, and to verify the information you received when you first contacted the seller. If what you see in the report differs substantially from what the seller told you, it’s a good sign you should walk away. It could be that the current owner simply doesn't know about what happened with the car before they owned it. It could also be that you're working with an illegal dealer who is trying to unload a vehicle they know nothing about.
The most important parts of the report are reported accidents and the vehicle's title status. It's easy for sellers to move vehicles across state lines to blur their current title status, though the report should show the car's entire title history. Note that collisions and repairs that occurred recently won't immediately show up on a vehicle history report.
Unless you are an experienced used car buyer and owner, it is a good idea to avoid any vehicle with a salvage title, or one that shows flood or fire damage. Many lenders will not loan money for the purchase of vehicles with branded titles, and some auto insurance companies will not insure them.
Our guide to what’s in a vehicle history report shows you what you can learn from the document.
7) Test Drive the Right Way
It's now time to meet the seller, inspect the vehicle, and take a test drive. You'll want to meet in a public place, and not at their home or yours. More and more cities offer safe exchange zones, which are areas specially covered by video surveillance and monitored by police. If your city doesn't have one, choose a shopping area parking lot or another location with people around. For many reasons, it's a good idea to meet during daylight hours.
When you first inspect the car, you want to use almost all of your senses. It's a good idea to arrive early so you can listen to the vehicle as it rolls into the parking lot. Look for damage around the entire perimeter of the car and glance underneath for drips of fluid. If there’s smoke coming from the exhaust pipe, note its color. Rainy days and dark nights make it easy to hide dents and scratches, so the better the weather, the easier it’ll be to perform a visual inspection. Test the lights, and know that a brake light that's not working might be something as easy as a burned-out bulb, or as expensive as a wiring harness that's been damaged by rodents. Look at the tires for both overall and uneven wear. Tires that have less tread on one side or another are indicators that something's wrong with the alignment or suspension.
Smell the interior for signs of mold, smoking, or pets. The scent of mildew may be evidence of flood damage. Some experts suggest bringing a magnet along to test whether lower body panels have been filled with composite material to hide rust damage.
Spend some time exploring the vehicle's interior before you head out on the road. You'll want to test every vehicle system, from the lights to the infotainment system. Even if it's the dead of winter, check the car's air conditioning.
Before your drive starts, ask to see the owner’s drivers license. Take a photo of it and the car's license plate, then send it to a friend or family member. Give them instructions to call you if you don't send them a preset message in a certain amount of time. Verify the name on the seller’s ID matches the name on the vehicle’s registration. If it doesn’t, you may be dealing with an illegal dealer, and you should walk away.
Most sellers are just trying to get rid of their car, but you have to protect yourself from people who might not be so reputable.
When you do head out on the road, once again, use all of your senses. Feel for vibrations that shouldn’t be there and listen for unexplained noises. Unpleasant or musty smells coming from the vents may be indicators of deeper issues. Do the steering and brakes feel right, or do they feel unresponsive? Can you see what you need to see when you’re comfortably seated behind the wheel? Watch for warning lights on the instrument panel.
Read our guide to test driving a used car to learn more tips for checking out a pre-owned vehicle.
8) Negotiate a Great Price
If the car passes muster on the vehicle history report and test drive, it’s time to negotiate a deal. Your research should give you a good idea of what fair pricing should be, but you don't want to start your negotiations at that price point. Ask the seller what they want for the car, and don't be surprised if it's a big number. Many car owners have an inflated sense of the value of their vehicles due to emotional attachments. It's easy for sellers to overlook legitimate issues if they’ve been dealing with them for so long that they no longer even recognize them as problems.
After they give you an opening number, counteroffer with a lower amount, backed by reasons you think their price is too high. Your justifications can include the prices of other similar cars, issues that you found on the vehicle history report, or problems you identified on the test drive. Remember, once a seller gives a price, they can't go any higher. Once a buyer gives out an amount, they can't go any lower.
It's important to remember that buying a car is a business transaction. The more you can take emotion out of the equation, the better. You probably will pay more for the vehicle than your initial offer, and the buyer will likely take less than their advertised price. That's the whole point of negotiation.
Don't allow a private seller to rush or bully you. Remember, you have the greatest power in the negotiation, as you can always walk away. Sometimes you'll have concrete reasons to do so; other times, you'll just have a notion that something's not right. Listen to your intuition.
There are two things you need to make clear in your negotiation: the price you have offered is contingent on the seller making the car available for an inspection by an independent mechanic, and the car passing that inspection.
9) Get a Pre-Purchase Inspection
If you take no other piece of advice from this article, please take this one: Never buy a used car without getting a thorough pre-purchase inspection by a mechanic of your choosing. If a seller will not make the vehicle available to the mechanic, it’s a huge red flag that should tell you to walk away from the deal.
A trained mechanic will know what to look for, and can put the vehicle up on a lift to thoroughly inspect its underside for leaks and damage. They can look for collision damage and check the quality of any repairs that were performed. If you give them a copy of the vehicle history report, they can check on any issues it highlighted. They should also be able to access vehicle recall information and check to see if the recall fixes have been performed. Some recalls, such as software updates, are hard for independent mechanics to verify. You may need to call a dealership or check the service paperwork for proof they were completed.
An experienced mechanic will know what goes wrong with different brands and models, so they can focus attention on components that may need service or have been serviced in the past. They’ll be able to give you a good idea of whether a proper maintenance schedule has been followed and give you an idea of what repairs you may face in the future. If the car is in good condition, the inspection will provide you with the confidence to move forward with your purchase.
Many urban areas have mobile mechanics who can go to the car, instead of having the car come to them. Some offer special pre-purchase packages, with set fees and a list of vehicle systems they’ll inspect. They will provide you with a detailed report of what they find.
10) Pay the Seller
Getting the money to the seller can be more complicated with private-party transactions, especially if they still owe on the vehicle or you're taking out a loan. If they still owe money, you or your lender should send your payment directly to the lender to pay off the loan and allow them to release the title. Any funds in excess of their loan balance can be paid directly to the seller.
Many private sellers ask people purchasing cars to pay in cash, which is fine as long as you do so in a safe place and document their receipt of the money with a bill of sale. Some may accept a cashier's check, though savvy sellers will ask to accompany you to your financial institution so they can verify it's not forged. Unfortunately, forgery of cashier's checks is a significant problem.
If you are getting a loan to pay for the car, your lender may write you a check that you forward to the seller. Some may make payments directly to the seller in the form of a check or direct transfer. Be sure to give your lender plenty of notice before you need the funds, and pay attention to their hours if you plan to buy on the weekend.
In cases where the previous owner still has a loan, and you're getting financing to buy the vehicle, most financial institutions can (and will want to) perform a direct transfer. That’s generally a good thing, as both lenders will want to make sure all of the paperwork is in order before they move the money.
Sometimes it takes a private seller’s lienholder several days to get the vehicle title after the loan is paid off. If that’s the case, consider using an escrow service that will only release any remaining funds to the seller once you receive the lien-free title. Usually, however, you’ll want to have the transferred title in hand the moment you pay for the car.
11) Complete the Paperwork
One of the most significant differences in purchasing a vehicle from a private seller versus a dealership is you'll have to work with the seller to ensure that all of the purchase, registration, financing, and title transfer paperwork is completed and filed.
The necessary paperwork you’ll need to complete for a private-party car purchase includes the vehicle’s title, which is signed over to you as the new owner. You need to have a bill of sale that's signed by both of you. It should indicate the transfer of the title and the payment for the vehicle. Many states require odometer disclosure statements and lien release information.
In some cases, it’s easier to perform the sale at a local DMV, so both you and the seller are assured all paperwork is completed to the DMV's satisfaction. In some states, you'll have to pay vehicle taxes at the time you file your paperwork with the DMV. Some private owners will want to take the license plates off the car before you take possession of the vehicle. Before they do so, however, you must have your new registration paperwork in order, as it is illegal to drive without plates or a temporary registration tag on the vehicle.
12) Get the Proper Insurance Coverage
A critical, yet often overlooked, part of a private-party car sale is auto insurance. Before you meet the seller to take delivery of the car, you will want to contact your car insurance company or agent. They’ll want to know a bit about the vehicle, including its make, model, trim level, and VIN. They can provide you with a proof of insurance document for the car.
The U.S. News & World Report auto insurance hub offers car owners a wealth of information to help them find the right policy at an affordable price. It not only provides information about the different types of insurance coverage you may need, but also what insurance company will best meet your needs. You'll also find information about car insurance discounts that can save you hundreds of dollars.
More Shopping Tools From U.S. News & World Report
The U.S. News & World Report Best Cars team is ready to help at every step of your car-buying journey. Our used car rankings and reviews help you find that great new-to-you car, while our guide to financing a car and getting a car loan helps you figure out how to pay for it. Our car loan calculator provides a plug-and-play method of determining your monthly payments, while our car affordability calculator assists buyers in setting an appropriate car-buying budget.
Car ownership comes with a price tag. We can help minimize those hits to your wallet with unbiased consumer advice on topics ranging from auto insurance to a how-to guide for buying tires and advice on how to make your car last a long time.