By Erienne Andvik
If you're shopping for a used vehicle, consider buying from a private seller instead of a dealership to get the best price. You'll likely need to do some extra research to ensure you're getting a good deal, but that should pay off as cash in your pocket after you've purchased your vehicle.
Let's walk through the process of buying a used vehicle from a private seller. Some steps are the same steps you'd take in buying a vehicle from a dealer.
1. determine what kind of car you need
First, figure out what you need vs. what you might want. Are you looking for style with a two-door coupe that's fun to drive? Or do you need a vehicle with towing power? Make a list of minimum requirements, and then make a list of things that would be nice to have. Having a written list will help you get a car you need, and reduce your risk of buying impulsively.
2. think money
Next, determine how much you want to spend, and where that money will come from. If you're buying an inexpensive car and have cash, make sure that money is available for withdrawal in case you find something you like.
Your credit union can offer you a car loan, even when you're buying from a private seller.
If you don't have cash to buy the car, your credit union most likely can offer you a car loan—even when you're buying from a private seller. Figure out how much money you can spend each month on a car payment. Then, stop in to your credit union and see an auto loan specialist. He or she will be able to help you identify how much you can afford to buy so you can stick with your budgeted monthly payment. The loan officer will take into account current financing rates, your credit score, and other factors before determining how much you qualify for. This process is called preapproval.
Remember: You don't have to buy a car for the full amount you qualify for—think of that as the maximum. If you buy something cheaper, you'll be saving money each month, or you'll be able to pay the loan off faster.
3. shop around
Shopping for cars sold by private sellers has changed a lot in the past decade. Newspaper classifieds still work, but a lot of sellers have gone online to sell their vehicles on sites such as CarSoup.com or AutoTrader.com. Your local newspaper also may have online classifieds if you prefer to deal locally. Craigslist also has an option to view cars sold by private sellers.
Spend time perusing available inventory. At minimum, ads should show the year, condition, features, and mileage of the vehicle. Once you find a few models you like, take their stats and plug them into a website like NADA Guides or Kelley Blue Book to find the estimated value of the car.
4. look at vehicles in person
Once you've narrowed it down to a few vehicles, you'll want to see the vehicles in person and take a test-drive. Set up a time and place to meet the seller, but be smart about when and where you look at a vehicle. See the sidebar for important safety tips.
Once you meet, visually inspect the interior and exterior of the vehicle to see if it matches the advertised description. If the vehicle meets your expectations, take a test-drive. Ask the seller how long you can test-drive the car; you'll want to test out a variety of driving conditions, such as slow city driving, fast highway driving, and varied terrain if possible.
If you don't like how the car drives, thank the seller for his or her time and walk away. If you're still interested in the car, it's time to channel your inner Larry King and interview the seller. Ask if you can view maintenance records, why he or she is selling, if the car has been in any accidents, and any other questions you have.
According to the Federal Trade Commission, Washington, D.C., most cars sold by private sellers are sold as-is, meaning if something goes wrong the day you purchase the car, you're on the hook for the repair. You can ask whether or not there is a warranty or service contract that would transfer to you.
Don't be timid—a car is a huge investment and you have the right to know all the details before making a decision.
5. more research
Write down the vehicle identification number, found on the bottom right corner of the windshield if you are looking at the car. Run a vehicle-history report on a website like CarFax to check for known major issues with the vehicle that the seller hasn't disclosed. A CarFax report costs about $35, so you won't want to run one until you're serious about a vehicle.
The last step is to have a mechanic inspect the vehicle. This will cost at least $100—perhaps up to $200 or $300—but it's worth it. Think of it as extra insurance that you're buying what you think you are.
7. negotiate price
One of the biggest benefits of buying from a private seller is the opportunity to negotiate price. After you've researched the vehicle, use any findings as leverage to negotiate a lower price. If negotiating doesn't come naturally to you, it can be a bit uncomfortable, but think of the money you could save. Go into the negotiation with a maximum price you're willing to pay for the vehicle. If the seller can't make that price, walk away. There will be other cars out there.
Once you've settled on a price, put the terms in writing. You'll also need to figure out payment terms. If you're paying for the car yourself, ask the seller which payment method he or she accepts. A cashier's check or cash would be appropriate, depending on the cost of the vehicle, as some sellers might not accept personal checks.
If you're getting an auto loan from your credit union, it can write a check to the seller, or you can arrange to meet the seller at your credit union to finalize the deal.
You also should take a trip together with the seller to your state's department of motor vehicles to officially transfer the title and registration to your name.
Buying a car can be hard work but, if you're willing to put in the effort, you can get a good deal that will serve you well for several miles to come.