woman with car

While many people associate car purchasing with dealerships, private auto sellers make up a significant portion of the used car market, accounting for nearly 30% of used car sales from 2011-2013.1 Purchasing a car from a private seller can potentially net you hundreds or thousands of dollars in savings, compared to buying from a dealership. Many times, private sellers need to sell their car quickly due to a move, because they no longer need a vehicle or because they need extra money.

Whatever the circumstances behind a seller’s private sale, if you’re considering a purchase from a private party, there are a few things you should consider:

Benefits of private vehicle sales

A buyer can sometimes obtain a used car at a lower price from a motivated private seller than at a dealership, especially if he or she is willing to do some cleaning or repair work. In many cases, the individuals that are most inclined to sell a vehicle on their own are the ones who have taken good care of their cars. From the standpoint of a responsible owner who has maintained and cleaned his or her vehicle regularly, the trade-in value probably isn’t a fair reflection of value as he or she sees it. As such, the owner will sell the vehicle on their own to recoup their investment, probably to a seller who appreciates the car’s condition.

Drawbacks to the private sale

In some cases, a private seller is not under the same obligations as a dealership to ensure that a used car is in good, operative condition at the time of the sale. If you buy from a private seller, you will generally have little legal recourse if the car breaks down soon after the sale.  Dealerships also rely on repeat business2 and good reputations;3 and due to the prevalence of online reviews, through which an unhappy customer can post a negative review online for the world to see, dealerships have an ongoing incentive to make sure each buyer is satisfied - an incentive that is much less common with private sellers.

A private seller is typically not in a position to offer any warranties or guarantees. The burden of transferring the title and paying applicable taxes lies with the buyer and the seller, neither of whom may be completely familiar with the vehicle transaction process.

Guide to buying a car from a private seller

Learning how to buy a car from a private seller expands your buying options beyond dealerships, possibly allowing you to get a better deal on your next car. Find out how to shop smart and what to look for when buying a used car from a private party.

If you're committed to exploring used vehicles from private sellers, this guide can help you navigate the process.

  1. Research – The first thing you need to do is research, plan and prepare for an automobile purchase. This includes budgeting for your car purchase, seeking financing, researching vehicles that suit your lifestyle and utilizing websites and classified ads to find used car offers in your area.

  2. Scrutinize ads – When reading ads for cars, pay close attention to the length and quality of the vehicle’s description. Relevant information like mileage, make, model, year and length of ownership should be prerequisites to any ad. The seller should also indicate if he is the only owner the vehicle has had, or if the car has had other previous owners.

    The description should also briefly outline the history of the vehicle’s use, any accidents sustained and details about the vehicle’s condition. Ideally, the seller will also disclose any imperfections or needed repairs. An ad that lists problems can sometimes signal that a seller is making a sincere attempt to accurately represent the vehicle’s condition.

  3. Contact seller – If you’ve found a detailed description of a vehicle that you’re interested in, you can move forward with contacting the seller. Begin by confirming the information in the ad and ask preliminary questions concerning accident and repair history if that information is missing from the ad. Next, request a test drive and arrange a meeting with the seller in a public place, like a local parking lot.

  4. Examine the vehicle – Once you meet the seller, ask to take a tour of the vehicle and examine its condition before your test drive. If he or she has maintenance records, you’ll want to look closely at those as well. Take a few minutes and inspect the following:

    • Rust - Look closely around the wheel wells, doors (inside and out) and the lower portions of the body. Rust that has been painted over will return, so look for areas of raised or irregular paint in the same areas.

    • Tire tread - New tires typically cost anywhere from a few hundred dollars to a couple thousand, so if it looks as if the tires will soon need to be replaced, you should factor this into your offer. Uneven tread can also mean the car’s brakes have been applied too hard, which may indicate other problems.

    • Pedal wear - Might suggest that the previous owner accelerated and braked too forcefully.

    • Headlights and taillights - Turn on the headlights to ensure they work. Stand behind the vehicle and ask the seller to apply the brakes so you can observe the brake lights. Do the same for the turn signals.

    • Interior electronics - Turn on the radio and interior lights to assure their functionality.

    • Shocks - Gently push the car hood down. The car should rock up and down and then lie still. Repeat for the car’s rear.

    • Wipers - Examine wiper wear.

    • Car battery - Ask when it was last installed. Examine for rust around the bolts. New batteries usually run between $100 and $200, but can be even more expensive for cars that need a manufacturer’s battery.

    • Locks – Be sure locked doors remain locked without a key entry. Also test any keyless entry features.

    • Manual transmission (if applicable) – While test driving, try to get the car in every gear while on the road; this may require driving the car on a freeway.

    • Reverse gear – Make sure the car reverses without complications.

    • Air conditioning and heat – Turn on both features and allow them to run for at least two minutes.

  5. Test drive - Once you've made your preliminary examination of the vehicle’s crucial and observable parts, it’s time for the test drive. Try to make the test drive last for no less than twenty minutes, so you can get a better sense of the car’s performance. Listen carefully to the sound of the engine and pay attention when the transmission shifts. If the engine seems unusually loud before shifting gears (in a vehicle with an automatic transmission) or if the shift doesn’t occur smoothly, it could be a sign of a transmission issue. Drive the car on the highway so you can see how the vehicle handles at higher speeds. If it seems that you need to adjust the steering wheel constantly to keep the vehicle going straight, it could be a sign of tire wear, alignment issues, or more serious problems.

  6. Take the vehicle to your mechanic – If everything goes well with the test drive and you don’t find any major issues when you inspect the car, it is a good idea to ask the seller if you can take the vehicle to your mechanic for further inspection. The mechanic will be able to do a more thorough inspection of things like seals, brakes and bearings. 

  7. Make an offer, close the sale – Once you’ve completed the test drive and inspection and are satisfied with the car’s condition and performance, you can make an offer to purchase. Whether you want to simply offer the asking price or less is entirely your decision. If you’ve noticed significant defects or needed repairs (worn tires, old air filter, rusted battery), you can offer less than the asking price. If no such defects exist and the car is in good condition, you might not want to offer too much below the asking price so you don’t risk insulting the seller.

    Once you agree on a price, all that remains is exchanging the money and completing the necessary paperwork. The most pressing document is the vehicle title, which officially transfers ownership from the seller to you. You should also request a signed receipt or bill of sale detailing the transaction, which you might want to bring with you to the sale. Each state will have their own set of obligations and necessary documentation to complete for a sale, so you should call a local BMV/DMV and ask for any clarification on sale documentation.

Never hesitate to leave a situation that feels unseemly or suspicious. Also consider bringing a friend or relative to help you inspect the car and ensure safety. If you suspect a car has been stolen or the seller has arranged a meeting under false pretenses, leave immediately and notify the police.

[1] NIADA 2014 Used Car Industry Report (NIADA: Arlington, 2014), 16.
[2] http://www.mckinsey.com/insights/manufacturing/how_to_build_top-performing_auto_dealerships
[3] http://www.reviewtrackers.com/70-percent-car-buyers-influenced-online-dealership-reviews/