9 Steps To Buying A Used Car From A Private Seller

Buying a used car from a private seller can yield significant savings.  I’ve been buying used cars for many years and I’ve learned a lot about the car buying process.  I’d like to share a 9-step process I use to buy used cars from private sellers.

9-Steps to buying a used car from a private seller

Step 1 - Determine the price you can pay

Start by looking at your budget first and determine how much you can afford to pay each month.  In a typical budget, transportation expenses should be between 10% and 15% of your net income.  It includes car payment(s), insurance, gasoline, maintenance and repairs, tolls, tags, and taxes.  

If you don’t yet use a budget to manage your finances, this is a good time to start using one.  You can find forms and videos that will show you how to create and use a budget on my resource page.

The good news is there are cars at all price levels.  No matter what your price is you can find a car that will meet your needs.  Sure, it takes longer to find a less expensive and reliable car, but it’s totally worth it!

Step 2 - narrow down your search

First, decide on the kind of car you need or want.  Knowing whether an SUV, sedan, mini-van, or truck will best fit your need will help to narrow down your search.  Second, choose 2 to 3 manufactures.  Choose manufactures that are known for their reliability and longevity.  Toyota, Honda, Nissan fit this bill.  So do their premium counterparts, Lexus, Acura, and Infinity, although they are usually priced higher.

Step 3 - Check prices and reviews

The next step is to limit your choices to just 2 or 3 car models.  To do this you’ll need to do some research. Fortunately, finding the perfect car for you and your budget has never been easier.  With the tremendous amount of information available online you can do all this from the comfort of your home.  

The following websites are great places to read reviews, compare models,  and learn which cars would be a better buy based on the cost of ownership.  You can also check YouTube.com for video reviews done by members and owners, which can be very useful.  

Step 4 - Search for your next car

There are many options here, which can seem overwhelming. The sites I mentioned in the previous step all (except YouTube) have a car search feature.  

For cars sold by private sellers, I like the three listed below.  Between all these sites you will have plenty of cars to search through that are in your area.

Once you find a vehicle you’re interested in use kbb.com or Edmonds.com to find the suggested (market) price of the vehicle.  Print a copy and bring it with you to use in your negotiation with the seller.

Step 5 - Contact the seller

When reaching out to the seller ask as many questions as you can to learn about the condition of the car and the person that’s selling it. You’re not just asking about the car, you’re also trying to find out if the seller is a trustworthy and honest person.  Honest people will tell you the true condition of the car.  If they're not honest, well,… it’s best you walk away no matter how good the deal sounds.

Step 6 - Test-drive the car

Test driving and the initial inspection of the car is a crucial step in this process.  You must be as thorough as possible.  I’ve added an inspection checklist on my resource page, which you can download, print, and bring with you.  It includes all the detailed information you’ll need to assess the vehicle properly.

Step 7 - Negotiate the deal

Once I’ve tested the car and believe it’s a good fit for me, I like to get the price negotiated to confirm the deal.  This shows the seller that I’m serious and I’m not wasting her time.  From my research, I’ll have a good idea of what the market price is for the vehicle and will make my offer as close to that price as I can.  It’s only a good deal if both parties are happy.

Step 8 - Have the car inspected

Before doing any of the paperwork and handing over the money, I ask the seller to allow me to have the vehicle inspected by a mechanic.  I’ll arrange this ahead of time so the seller doesn’t have to wait more than 2 or 3 hours to close the deal.  I give the seller a security deposit as a gesture of good faith and to show my committment to finalizing the deal that day.  

Most people won’t object to an inspection if they are honest about the condition of the car.  I usually ask the seller during my initial call if they will allow me to get the vehicle inspected.  I will not buy a pre-owned vehicle without an inspection.  It’s cheap insurance!  Asking ahead of time will save me the trouble should the seller not agree to the inspection.

If the inspection reveals deferred maintenance or items that need repairs, I'll use the mechanic's estimate to renegotiate the price to allow for the needed repairs.

Step 9 - Close the Deal

If the car inspection comes up clean you close the deal.  Prepare and ensure all parties involved sign a bill of sale and any state required documents to transfer ownership.  State Driver Motor Vehicle Department (DMV) websites have all this information easily available, or you can call your local DMV office and they'll provide you with the information.  If you're financing the purchase the lender will provide the paperwork and oversee the transaction.

Some states charge a sales tax on the price of the car.  Make sure you factor this into your price. Physically check the title for liens and have the owner(s) sign the back and fill in all the proper information.  All that's left is to pay the negotiated price and take possession of your new (to you) car.

Buying a car from a private seller isn't complicated.  Yes, it requires a little time and effort on your part but you can save thousands of dollars by buying your cars this way.

Have you bought a car from a private party?  What was your experience?  Would you do it again?