You're driving and notice a parked car with a bright orange "FOR SALE" sign in the windshield. The price is right, the car you're driving is on its last legs, and there's a contact number listed for the seller. Should you call? Buying a used car comes with some risks, and these risks multiply when you purchase from a private seller. That doesn't necessarily mean you should forget the idea, especially if your car budget is very tight. Privately sold vehicles are often less expensive than the used cars you see at the dealership, but if you go this route, make sure you do your due diligence so that you don't end up with a junker. We cover the benefits and risks of buying from a private seller, what to look for before you buy, and some alternative options. 

Benefits of Buying from a Private Seller

car with for sale sign
You're more likely to find a bargain when you buy from a private seller.

The biggest benefit of buying a used car from a private seller is that you'll usually pay a lower price than you would at a dealership. Dealerships sell cars with the goal of profiting from each sale, but private sellers are usually trying to sell their old car in order to buy a new one or clear garage space. Their goal is to sell the car as quickly as possible, which means you can walk away with a great deal. 

Another benefit is that there is a more even playing field for negotiations. When you go to a car dealership, you're dealing with professional salespeople, and no matter how good of a negotiator you think you are, it is unlikely that you'll walk away with the price you had in mind. Not only will they not be as flexible on price, but car salespeople will also try to upsell you on extras which puts you at risk of overspending. When you buy from a private seller they will be more likely to negotiate on price, and they're not trained to upsell you. 

Risks of Buying from a Private Seller

woman with broken down car
You don't want to buy a car only to have it break down on your way home. 

Is the lower price you get when buying from a private seller worth the risks you take on by not going through a dealership? Potential risks can include buying a lemon, having to pay for costly repairs, finding out the seller still owes money on the car (and doesn't have the title), and scams like title washing.  

When you buy a vehicle from a dealership, it may be covered under warranty which protects you in case something goes wrong right away. When you buy from a private seller, you buy the car "as is" and take on all the risk of breakdowns and costly repairs. This can quickly sour that 'great deal' you got. You'll also be taking on the title from the private seller which can be risky if the car isn't fully paid off. If the seller financed the vehicle and hasn't finished making payments, the lending company has a lien on the vehicle and can come after you and even take the car. 

Buyer Beware: What to Look For

man evaluating car's condition
Evaluate the car's condition, title, and the trustworthiness of the seller. 

If you're willing to take the gamble of buying from a private seller for the reward of a lower price, take precautions to evaluate both the vehicle and the seller. You'll want to inspect the car yourself and take a test drive, check for any red flags in the car's condition, get a vehicle history report and also a pre-purchase inspection. When you test drive, check for warning signs like unusual noises, rust, suspicious body damage, and damage to the engine or to the exhaust system. You won't catch every mechanical issue just by test driving the vehicle which is why you should also get it inspected by a professional mechanic. 

Once you have evaluated the vehicle and found it to be in acceptable condition, you'll want to evaluate the seller and the vehicle's title. Make sure that the name of the seller is listed on the title (check their ID) and there is no lien on the car from a lending company.  Watch out for scams like 'title washing' which is when the seller alters or falsifies a car's title to remove a salvage note. A salvage title means the vehicle has been totaled and rebuilt (not a confidence-inducing option).

Alternative Routes

woman at used car lot
A used car lot is a safer route for finding a reliable used car at an affordable price. 

Not comfortable with the risks of buying a car from a private seller or haven't found a privately listed car you're interested in? There are other avenues to find affordable and reliable used cars in your area. Alternative options include: buying a used car from a dealership, going to a private used car lot, or visiting a national chain like CarMax in your local area. Buying from a dealership gives you the most peace of mind since you’ll have the option to purchase a certified pre-owned car that comes with a warranty. For the best deals, however, you'll have to look for models that are more than just one or two years old. 

auto finance for a used car
If you need auto financing, buying from a dealership is your best bet.

The benefit of buying your car from a dealership or a used car lot is that it will be a more straightforward process. The paperwork will be handled by the salesperson and you'll know you own the car outright when you purchase. You won't have to worry about checking if the title is clean or if there are any liens on the car. You'll also have the option to get financing from the dealership if you're not planning to pay for the car in cash. It is much more difficult to obtain a car loan when you purchase from a private seller. 

Start by searching online for all available used cars in your area and compare the models you're interested in along with their prices. Take notes on the vehicles you're considering and use them when you're negotiating on the price. After you narrow down your list, go in to take a test drive and inspect the vehicle. Although there is less risk involved when you buy from a dealership or car lot, you still want to make sure the car is in the same condition as advertised.

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