If you’re in the market for a new car and want to make a fast transaction. Buying from a private seller probably sounds like the right way to go. But you might want to pump the brakes.
As with anything, there are benefits and costs when you choose to purchase a vehicle from a private seller. But unlike buying from a dealership, a business that has to follow state consumer laws. Private sellers have more freedom. As such, you could end up buying a lemon.
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While it’s possible to get a great deal from a private seller, unfortunately, it’s a rare event. As with many high-reward circumstances. It also involves a lot of risks.
Private Seller vs. Dealership
The first major decision you need to make when selecting and purchasing a new used vehicle is whether you will be buying from a private seller or a dealership. A private seller is an individual looking to sell their vehicle to another individual for the maximum value they could get. A dealership buys and sells hundreds or thousands of cars every year and must follow all state and federal rules and regulations.
While doing business with a dealer such as Buy Here Pay Here is the safest and easiest way to purchase a used car. Buying from a private seller can save you money (if you’re lucky). But be aware of the potential risks before you invest the time and energy into buying from a private seller.
Private Seller Risks
Although there are some good advantages, such as potentially better deals. There are many reasons why you might want to avoid private sellers entirely.
Lack of Consumer Protection –
The state and federal laws and regulations that apply to dealerships aren’t applicable when buying from a private seller. When you buy a car from a private seller, you are buying it “as is,” which means that any problems with the car are now your problems.
Private sellers aren’t covered by the FTC’s Used Car Rule. Which means they don’t have to post a Buyers Guide the way dealers do. You also won’t get any warranties on the vehicle. Unless the manufacturer’s warranty is still in effect and you successfully transfer ownership. This is something to consider since you will have to contact the appropriate division of the manufacturing company to update their records.
More Footwork –
As the old proverb goes, “Time is money.”
Consider all of the time you will spend on Craigslist and other websites, researching the cars, contacting the owners, ordering vehicle reports, discussing meeting times, finding transportation, scheduling inspections, and transferring all of the paperwork.
Unless you get really lucky. You will find this process extremely frustrating and time-consuming.
More Paperwork –
Both you and the seller are responsible for all the paperwork.
This means transferring the title and/or bill of sale, registration, and any related fees and taxes.
Often, you will need to make the trip to your local Department of Motor Vehicles (DMV). And we all know how fun that can be.
Vehicle History Reports and Inspections –
Many times, a private seller will not have a vehicle history report to show you and might refuse to pay for one.
This means you will have to spend the money to get a vehicle history report on CARFAX or a similar website by looking up the Vehicle Identification Number (VIN).
Even if they have a CARFAX or similar report, it’s highly recommended that you conduct your own vehicle inspection, which will set you back around $100.
Worse Negotiations –
Sometimes negotiations are easier, sometimes they’re harder. It really depends on who you are working with. Be aware of dealers who pose as private sellers and use suspect tactics to close the deal.
Never trust a dealer disguising themselves as a private seller. They are obviously trying to deceive you. Regardless of if they have good or bad intentions. If you have any strange suspicions, it’s best to walk away before you get in too deep.
How to Buy a Used Car from a Private Seller
If you do decide to buy from a private seller. Keep in mind all of the extra work involved. Since private sellers are not subject to the same strict laws and regulations that dealerships are, the risk of fraudulent practices significantly rises.
Here are some things you should do to ensure you’re dealing with a trustworthy seller:
- Right off the bat, ask them if they are the owner. You want to get this out of the way and the best way to do so is by asking. Ask a little bit about their time with the car, how long they’ve owned the vehicle, where they purchased it from, etc. This is where you should be able to catch any tell-tale signs, such as “selling for a friend” or “just bought it recently.”
- Ask the owner about vehicle history. Don’t be afraid to call and ask about the car. If they are car flipping, they probably won’t have maintenance records. If they say they have no records, ask them where they get their maintenance and repairs done and then call the business and ask for them. Here, you will also be able to tell if the name of the person you are speaking with matches the name on the records. If they don’t know details about the car off the top of their head, you may be dealing with a disguised trader.
- Look up the phone number of the person you are speaking with. If the number comes back as a pay-as-you-go phone or in relation to other vehicle sales, walk away.
- Double-check the address. Be wary of anyone wishing to meet in a place other than their home. You want to make sure that the seller’s address matches the address on the car title and registration. If they have a reason for not meeting at home, consider driving by to make sure it is a real address.
- Test-drive the car on the street and highway. You will want to heighten your senses while test-driving the car. Pay close attention to any sounds, sights, smells, or feelings you have while driving, turning, and braking on both street and highway. Test all of the electrical controls: windows, radio, locking system, etc. Make sure all of the lights work and that the vehicle drives and brakes straight. This should only take about ten or fifteen minutes.
- Get a car inspection. It is always a good idea to have the car inspected when buying from a private seller. It will cost around $100 for an inspection from an ASE-certified mechanic but will save you from buying a potential lemon.
- If you have suspicions, walk away. You are under no obligation to buy the car. Ask a lot of questions. Use your gut instincts and listen when they are telling you that something is fishy. If you’ve been lied to once, you’ll probably get lied to again. You don’t build trust, both with dealers and personal sellers, you may be in for a rude surprise.
- If you are buying from a private seller, make sure the title and registration have been successfully transferred before handing over the money. It’s also a good idea to check if there are any past-due registration fees.
Drawbacks of private sales
Many private sales are made on an “as is, where is” basis. This means the buyer takes all responsibility for any problems after purchase.
While you may get a cheaper price if you shop privately. You have little legal protection if things go wrong. Private sellers don’t have to:
Display a Consumer Information Notice (CIN) on the vehicles they sell — a CIN provides important information about the vehicle’s history and any money owing comply with the Consumer Guarantees Act (CGA) or the Fair Trading Act (FTA).
However, if you do buy a car privately and have problems.
You may have some rights after purchase if:
- you were persuaded to buy the car based on false information the seller gave you
- money is owed on the vehicle and it is repossessed by a finance company
- the seller didn’t have the right to sell the car
- the car seller should actually be a registered motor vehicle trader.
Lack of verification
To some buyers, a private sale can seem like something that goes on “under the table.” As such, if they feel they don’t trust the seller. They may have little recourse if they get involved in the deal with the down payment or other transaction.
In contrast, a dealer’s lot is a professional business where customers can feel more secure in handing over money or information
Questionable test drives
Some sellers, as well as some buyers, are not quite comfortable with a test drive and some private sale situations. That’s because, again, in a private sale, there is no reputable shop involved. Just a car owner and a potential buyer.
The seller may be confused about insurance requirements for a test drive. As in some situations, the test drive may not be fully covered. A dealership has ample insurance coverage for letting car shoppers test drive vehicles. Also, a dealer may feel safer to ride with than a stranger selling a car off the street
Lack of financing. Most drivers know they can’t go to a private sale and expect any kind of financing. This is a specific service the dealerships provide. However, if a customer is willing to make most of the payment up front. They may be able to find third-party lenders who will finance the balance in a private sale.
If you’re planning on buying your next vehicle from a private seller. You should know the risks involved. Here are some things to look out for before signing the pink slip.
Meeting strangers at unfamiliar locations.
No matter what age you are, someone you don’t know is a stranger. Often, private sellers will arrange to meet with you at a location of their choice. Before agreeing to meet, make sure the location is in a highly trafficked area so that if something should happen. There are people around to alert. Above all, never meet with the private seller by yourself. Always buddy up and let your friends and family know where you’re going and at what time. Yes, you’re an adult who can take care of yourself. But things happen.
used car dealers must abide by Federal Trade Commission rules as well as state regulations governing how they operate and sell vehicles. Used car dealerships must also provide a money-back guarantee or short-term warranty. If the vehicle doesn’t run as advertised or it’s learned it has an accident history that was not disclosed, the dealership must refund you.
This is not the case with a private seller. Once you have purchased the vehicle and signed your name to the title. Anything wrong with the vehicle is your problem. It is up to you to research the vehicle and learn its accident history prior to the purchase. If you don’t take this step, a private seller can take advantage and sell you a car on its last legs, unbeknownst to you.
Filing vehicle ownership paperwork yourself
Raise your hand if you like filing paperwork. Your hand isn’t raised, is it? When you purchase a vehicle from a reputable dealership. The car dealer you did business with will take care of the paperwork. When you purchase a vehicle from a private seller. You are responsible for completing and filing the paperwork correctly.
You will need to make sure the paperwork is correct and that you have all of the necessary documents. If the paperwork is mishandled, the private seller can return later and claim the vehicle is still rightfully theirs, putting you in an unfortunate predicament.
If you’re going to buy a new car, make sure all your ducks are in a row, that includes getting car insurance. To get matched with an affordable policy.
If you buy a used car from a dealership, you have a larger selection of cars to choose from. Most dealerships offer financing options, as well as warranties on their used cars. You can also offer your current car as a trade-in, which can help reduce the used car’s cost.
You have more legal protection if you purchase a used car from a dealership. If you run into problems after purchasing the vehicle there are strict laws to which car dealerships have to comply. Dealerships also value their reputation and good dealers will go the extra mile to solve problems that may arise after the sale, while private sellers don’t need to
Finally, beware of cars that are being sold for an extremely low price. As the saying goes, “If it’s too good to be true, then it probably is.” Sometimes the car being offered is a lemon or a fraud. There may be things that are wrong with the car and the owner just wants to get rid of it.