How do I buy a car from an individual private seller — not a dealer?

When you buy a car from an individual, you pay with cash, a money order, or a bank cashiers check. The money can come from savings, a checking account, a family loan, or a loan from a bank or financial company. Most sellers do not like personal checks.

Buyers sometimes expect a private seller to “take payments” but any smart seller will not agree to such a plan. It is too risky. As a buyer, it’s better to get your own loan.

Requirements for a car loan

Loans from banks or finance companies require that you have a not-so-bad credit score, have an income sufficient to repay the loan, and have no excessive debts that might interfer with your ability to repay the loan. Loan companies do not want to give money to people who are unable to repay a loan.

Buying a car with bad credit – or no credit

People who have a bad credit history — a history of not making payments on time or of missing payments on other loans – will have problems getting a car loan. The lender will assume that if you have had problems in the past, there is a good chance that you’ll have problems again.

Most first-time car buyers have no credit history. Having no credit history is almost as bad as having a flawed credit history. Loan companies don’t have enough data to make a decision about you, so they often take the safest route and reject your loan application. Building good credit takes time and there is no quick easy solution.

The solution for people with bad credit or no credit is to get a co-signer, who agrees to make payments if you should default. Although the loan is completely in your name, the co-signer would have to pay if you do not. It is a good way not only to get a loan that you might not otherwise be able to get, but it provides a good way to build your own credit history for the next time you need a loan.

If you can’t get a co-signer, consider a reputable online car loan company such as that specializes in providing auto loans to people with no credit or poor credit.

Getting a loan

When you buy from an individual, get a complete description of the car, year of manufacture, make, model, and list of options. Also get the VIN (Vehicle Identification Number), the price you intend to pay for the vehicle, and take this information to your bank, finance company, or online loan company to apply for a loan. The amount of the loan for which you will be approved will depend on the age of the vehicle, its “black book” value, your income, your debts, and your credit score. If you can’t get approved for the full amount of the price of the vehicle you want, you’ll have to come up with cash to make up the difference.

The bank or loan company will look at your information, get your credit score (and your co-signer’s), and verify your income and debt information. They will come back to you to let you know that you are approved (or disapproved), and the amount of money they are willing to provide to you for the vehicle. The bank or loan company will write you and/or the seller a check.

Write a Bill of Sale

It is good to create a simple legal document called a Bill of Sale. It can be an informal handwritten document, or you can pick up a printed version at any office supply store. It should contain the names and addresses of both buyer and seller, a description of the vehicle, makes/model/year, VIN number, and mileage. A smart seller will also insert a clause stating that he vehicle is being sold “as-is” without warrantees or guarantees. Both buyer and seller should sign and date the document. Make a copy for both buyer and seller.

Get a clear title

Make sure the seller has a clear title that he can hand over to your at the same time you hand him your money. If he still has a lien (loan) on the vehicle, you should conduct the transaction with the seller at his bank. That way, you can see that his loan gets paid off with your money and that the bank gives you the title directly. Accept no promises from a seller about sending the title to you later.

Inspect the vehicle

It is also good to have had a mechanic inspect the vehicle before the sale to make sure you understand the car’s condition. It is not a good idea to simply accept the seller’s word about the condition of a car. Not that sellers are dishonest (although some are) but he may not know about some hidden problems, and therefore can’t tell you about them.

Also get an AutoCheck® Vehicle History Report. so that you’ll know if the car has been wrecked, flooded, or has been involved in accidents. Although these reports can have incomplete and sometimes inaccurate information, they are very valuable when buying a used car.

Where to find cars from private sellers

They are everywhere. Newspaper classified ads. In free “auto trader” magazines at your local auto parts stores and supermarkets, and at online classified web sites. We also suggest you check out eBays list of  where more used cars are sold every day than from any other source. Just take caution and ask a lot of questions.


Buying a car from an individual is not difficult, but there are precautions you need to take to make sure you don’t have problems. Remember, used cars are nearly always sold “as-is” which means you can’t take it back if you find problems later. Furthermore, lemon laws don’t apply to used cars and there are no “3-day right of return” laws as many people believe.

For additional information and advice about buying used cars, see the Used Car Buyers Guide.


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