How to Close a Private Car Sale

What to do when selling a car privately

What payment to accept when selling a car: Selling a car privately for cash is the most universal way for sellers to get paid. Some buyers may prefer using a cashier's check rather than count out and hand over a large sum of cash. The latter method is generally safe but still susceptible to fraud through counterfeit checks. If your buyer wants to use a cashier's check, follow these safety tips and meet at the buyer's bank and have the bank issue the check in your presence. If the buyer pays cash, he or she might request a receipt. If you provide a bill of sale, this will serve as a receipt.

When vehicles are sold remotely, you can use an escrow service to facilitate the transaction. The escrow service essentially verifies that the funds are paid and transfers them from the buyer to the seller. We'd discourage accepting a promise of future payment from a buyer, even from someone you know. You're under no obligation as the seller to float a loan, however temporary. And if the vehicle is wrecked shortly after the sale, your buyer may be less than motivated to continue making payments.

Limiting your liability: It's unlikely, but imagine someone drives away in the vehicle you just sold them and gets into an accident. Can you be held responsible? There are two ways to deal with this concern. First, record the odometer reading, then sign the vehicle's title over to the buyer. Second, in most states, a release-of-liability form can be downloaded from the registry of motor vehicles website. This story has links to the different Departments of Motor Vehicles.

Handling complications: What if the buyer calls the next day and wants you to take the vehicle back? Or what if the buyer claims you didn't reveal something about the vehicle or that he or she has discovered a mechanical problem?

Both buyer and seller should keep in mind that most states assume a used vehicle is sold "as is." That means there are no promises or guarantees after the sale. Buyers should thoroughly inspect a car before purchase. If you don't have the expertise to identify potential problems, it's often worth paying a mechanic for a prepurchase inspection, a routine service that most reputable shops offer. Sellers can even head off trouble by encouraging buyers to have an inspection. This is an especially common practice for older sports cars and collectibles.

If you want to avoid taking any chances with a private-party sale, there's a safer alternative here on Edmunds. Appraise your vehicle to get an instant offer, which is good for seven days at participating dealerships.

Car seller's checklist

• Perform a smog test if required in your state.

• Fill out a release-of-liability form, including current mileage, and file it with the DMV.

• Provide maintenance records, if available, to the new owner.

• Receive payment in cash, by cashier's check or, if selling remotely, through an escrow service.

• Take the license plates off the vehicle (if required by your state).

• Remove personal items from the glove compartment and other storage areas.

• Hand over both sets of keys to the new owner, along with any warranty papers for the car, the battery, tires, etc.

• Cancel insurance for the car.

What to do when buying a car privately

When buying a used car from a dealership, the dealer will handle all the paperwork and register the vehicle for you. In a private sale, the seller and buyer handle the paperwork themselves. While there are several small steps to closing a used car sale, the key takeaway is that you, as the buyer, need to obtain proof that you purchased the car legally and get a statement of what you paid for it.

Where to conduct the transaction: Since you're handling payment for the car, a bank's lobby is a useful neutral meeting place. It's safe and you can easily handle either a cash or cashier's check transaction. The downside, of course, is that you'll need to do it during banking hours.

If there is a lien on the car: In some cases, the car you're buying might have a lien on it. That means the bank or lender is in possession of the title. Banks often handle this kind of used vehicle sale, so check with the bank to learn exactly how to proceed. Essentially, the seller will need to make sure to pay off the balance of the loan before the car is transferred to you as the buyer. This process might take some time and delay the sale.

One way to handle this issue is to conclude the sale at the bank that holds the title. The seller can call ahead and ask the bank to have the title ready. Then, when the seller has paid off the balance of the loan, he or she can sign the title over to you.

Beware of fraud

Buyers need to be particularly cautious when buying a used car online from a private party, sight unseen. You could be the target of a scammer.

Car buyer's checklist

• Get a smog test from the seller (if required by your state).

• Make sure the registration is current. Otherwise you could be held responsible for late fees.

• Ask the seller to sign the title and record all the information, such as odometer readings, properly. (In some states you might need a transfer-of-ownership document, which is attached to the title.)

• Have the seller fill out a bill of sale if required in your state. You can show this document to the police if you are stopped right after the sale.

• Pay state sales tax when the car is registered.

• Activate or update your insurance policy.

Edmunds says

Private-party buying and selling involves some trust but can go smoothly if you're well acquainted with the laws and common practices governing the process. Use our guidelines above to ensure a safe and quick transaction.