Selling–or buying–a car from a stranger may be nerve wracking for both the seller and the buyer. When you don’t know someone there is a lot of risk involved on both ends. So what is the best and safest way to exchange funds during a private car sale?
There are six main ways that you can exchange money during a private sale. Some are faster than others, but others are safer (even if they take much longer).
Cash is king, as they say. On one hand cash is a very safe way to exchange money. The seller is guaranteed to get the full amount and there is no need to get another entity involved. But carrying around a fistful of cash can pose an inherent risk.
Top Tip: If you want to exchange funds using cash, bring a friend or loved one along for added protection and consider meeting at a public spot such as a park.
Nowadays more and more people prefer using digital payment platforms such as Venmo, PayPal, or ApplePay. These platforms have great benefits, as they are quick and secure. Because of this there is little risk of fraud. But the downside is that there are often transfer fees and there can be limits to how much you transfer.
Top Tip: If you want to exchange funds using a digital payment platform, determine what fees you will be responsible for and whether or not there is a transfer limit.
A certified check is a personal check that is verified by a bank to ensure that sufficient funds are in the account. When a check is certified those funds are frozen and allocated to that specific check. This guarantees that the check will cover the price of the car. Some banks treat these checks as cash more or less, so the funds may be immediately available once you cash the check. But other banks have a delay in this process which means that the money may not be available immediately. Fraud is still possible even with a certified check, as the certification itself may be forged.
Top Tip: If you want to exchange funds using a certified check, meet at the buyer’s bank to make the exchange. If the buyer wants to use a personal check, insist that they certify it first. These measures will reduce the risk of fraud.
A cashier’s check is similar to a certified check but the funds will come directly from the bank. A buyer will essentially buy a cashier’s check from a bank. There isn’t the risk of inadequate funds, but as with any type of check there is the potential for fraud. An unscrupulous buyer could simply forge the check.
Top Tip: If you want to exchange funds using a cashier’s check, meet at the buyer’s bank to make the exchange (just like with the certified check). This will reduce the risk of fraud.
Another option for exchanging money is to do a bank transfer of the funds. You will not need to worry about checks or certification, the funds will simply move from one account to the other. This is much safer than using a check, but the downside is that it can take up to 24 hours to make the transfer.
Top Tip: If you want to exchange funds using a bank transfer, double and triple check that all of the banking information is correct on both ends.
A less used option for transferring money in a private car sale is to put the funds in escrow. When we think of escrow we typically think of buying a home, but the same idea can be applied to buying a car. An escrow service is a third party who holds the funds until the vehicle transfer is complete. This protects both parties as it ensures that the transaction is complete before releasing money and releasing the title. There is a paper trail which makes it even more secure for both parties. But the downside is that this can take some time to complete and comes with an added fee, typically around 2%.
Top Tip: If you want to exchange funds using an escrow service, do your research to find a reputable company that charges a fair fee. Make sure that the other party signs off on the company as well.
Buying a car from a private seller can be daunting. After all, you are the one with the money, and they are the one with the car you don’t really know that much about. But there are steps you can take to help protect yourself when you are buying.
Do your research. You should not only do your research on the make and model in general, but also on the VIN number. Ask if the seller will pay for a CARFAX report to be sure that the car hasn’t had any major damage and that there aren’t any recalls out on the car.
Ask for maintenance records. If the seller has any maintenance records that they can share that will help you be sure that the car has been properly maintained.
Have the car inspected by a mechanic. If you want to be extra sure that the car is in great shape, have it inspected by a mechanic before you complete the sale.
There are risks when looking to sell your car as well. You don’t want to end up with no car and no money, which can happen if you get duped by a scammer. But again, there are steps you can take to help protect yourself.
Avoid checks if possible. Checks have a high likelihood of being fraudulent, so you are better off with one of the other payment methods we outlined above.
Walk away if something feels wrong. After all of that work to advertise and sell your car you are probably anxious to have it all be over. But if something feels wrong, it most likely is. Don’t be afraid to walk away if you get a bad feeling about the buyer–or the circumstances.
Selling and buying a car privately are inherently riskier than selling or buying a car from a dealer. But being smart and doing your research can help protect you, whether you are the seller or the buyer.
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