How to Sell or Buy a Car Privately

Whether you’re selling your car privately or buying a car from a private seller, there are some important steps to consider to ensure a smooth and hassle-free transaction. Specific requirements vary quite a bit depending on what state the sale takes place in, so be sure to consult with the local motor vehicle department so you don’t miss any crucial steps.

How to Sell a Car Privately

When you decide to sell a car yourself rather than going through a dealership, you have more control over the asking price and may pocket more money. The trade-off is that you’ll need to take care of all the paperwork, so it’s important to know ahead of time what you need to have prepared before you list your car for sale.

Establish the payment types you’re willing to accept. Even if you’re selling the car to a friend, it’s a bad idea to accept personal checks or an IOU. A cash-only sale is the most straightforward payment method, but if that’s not something the buyer is comfortable with, then a cashier’s check is the best alternative. Unlike a money order or personal check, cashier’s checks are guaranteed by the issuing bank, so they’re as good as cash.

Get an emissions test done, if that’s required in your state. State regulations differ, but in many states, emissions tests are required on vehicles that are more than a few years old. If your car passes the test, you’ll have the documentation to show buyers. If it fails, you’ll need to address any mechanical issues and re-test until the car passes. Otherwise, you’ll have a more difficult time selling the car.

Perform maintenance—or lower the asking price. Even if the car passes its emissions test, there may be other repairs that need to be performed before it would pass a pre-purchase inspection, which you should encourage any prospective buyer to arrange. If you decide not to make the recommended repairs, you’ll need to drop the asking price on the vehicle to allow the buyer to pay for the maintenance.

Make sure your paperwork is in order. Different states require different paperwork, so it pays off to research your DMV/MVD requirements beforehand. 

• Title: In some states, the only document needed to sell a car is the title. Typically, you record some information on it, often including odometer readings, and sign ownership over to the buyer. The information required differs by state, and there are instances when you may not have the title in your possession (we’ll cover that later). Find out the requirements for transferring a vehicle’s title of ownership in your state, and then make sure you’ve obtained any additional paperwork from your local motor vehicle department. (Your local AAA office may have the many of the forms required by your state's DMV or MVD.) 
• Bill of sale: If the buyer asks for a receipt—which is a good idea, especially if they’re paying cash—a bill of sale acts as a supporting document for the purchase. Wyoming requires a bill of sale as part of the transaction, and there are times when it may be required in California and other states. Visit a DMV or MVD location or a AAA office to obtain the correct form for your state.
• Release of liability: Some states require a motor vehicle department release of liability form as part of the transaction. Even if your state does not, it’s not a bad idea to include one. Not only will this shift liability for any accidents or driving infractions from you to the new owner, it will also directly mail registration renewals to the new owner instead of ending up in your mailbox. Again, some of these may be filled in online at your state's motor vehicle department's website. In California, for instance, this document is called a Notice of Transfer and Release of Liability (NRL). You can fill in the CA DMV release of liability and submit it online.

How do I sell a car with a lien or an outstanding loan?

If you’ve still got an outstanding loan on a car you’re trying to sell, it’s likely that you won’t even have the car’s title in your possession. (The lender will have placed a lien on the vehicle, so they’ll hold the title until it’s paid off.) Before the title can be transferred to a new owner, you must ensure the lender gets what they’re owed.

This can mean that the buyer will take over the loan, provided they qualify for a loan with the same lender. More often though, it means you’ll pay off the remainder of the loan and transfer the title all in one transaction. The easiest way to do this is for you and the buyer to meet with the lender in person, having arranged in advance for them to have the title ready. The loan gets paid off with the money the buyer brought to purchase the car, then the lender signs the title over to the buyer. It’s a good idea to contact the lender in advance to confirm the amount you owe and to find out if there’s any other required paperwork or fees for the transaction.

For example, if you sell a car for $10,000 and still owe $5,000 on it, half of the money your buyer brings to the meeting will go right to the lender to pay off your loan—you keep the rest. Note that if you’re upside-down on your loan, you’ll need to come up with extra funds beyond the car’s purchase price to pay off the loan before the lender will release the title.

How do I sell a car if I don’t have the title?

Usually, if you don’t have the title to your car it’s because you’re still paying off a loan and the lender has it. If, instead, you’ve lost the title (or never had one), that doesn’t mean you can’t sell the car. Check your state motor vehicle department’s website for instructions on how to get a new copy of the title. In most cases, you’ll pay a small fee and get a new copy by mail within a few weeks, so be sure to plan ahead. (In California, it's not always necessary for the seller to order a new title before selling a vehicle. In most cases, you can print an online form for you and the buyer to complete. This will act in lieu of the title.)

If you’ve owned the vehicle for long enough that it predates when titles were even issued in your state, a notarized bill of sale may be used as a replacement for a title, so ask your motor vehicle department. 

How to Buy a Car from a Private Seller

Buying a car from a private seller instead of a dealer is usually a more relaxed experience, and you may get a better deal. You won’t have any trade-in to work with, so you’ll need to come up with the entire cost of the car, and you and the seller must complete all the paperwork yourselves. Here are some important things to consider before you buy a car from a private seller.

Do your own research on the car’s value. While there may be some complicated math that goes into what a dealer will post as the asking price on a used car, Kelley Blue Book values are most commonly used in private transactions. Buyers can look up the same information that sellers do to assess a fair price.

Mitigating factors (such as accidents or maintenance that needs to be performed) may significantly change a car’s value from what’s listed in the Blue Book, which is one of many reasons a pre-purchase inspection is imperative.

Gather the necessary funds. For most private party purchases, you should be prepared to pay in cash. If that’s not feasible, a cashier’s check is the next best thing.

If you’re getting a loan to buy the car, it’s a good idea to get pre-approved before you even begin car shopping. This way, not only do you stay within your budget, you also don’t have to worry about financing delays once you find the car you want.

Get a pre-purchase inspection. In addition to getting the car’s accident and maintenance history, both of which can be obtained by looking up the car’s VIN, work out an arrangement with the seller to take the car to a mechanic of your choice for a thorough pre-purchase inspection—at your expense.

While many car dealerships have short windows after a sale during which the buyer can return the car for their money back, cars sold privately are almost always sold “as is,” with no provisions for returning the car. It’s critical, then, that you get your own independent inspection—even if the seller says they’ve had one done recently.

If emissions tests are required in your state, that’s another important test to complete before you buy. This is something the seller should have done, so be sure to ask.

Make sure you’ve got all the paperwork covered. The documents required to finalize a used car sale differ by state, so be sure to get an overview of your state’s requirements. Then check with your motor vehicle department to make sure you have all the paperwork you need. 

You can take care of many DMV/MVD transactions—including title transfers in Alaska, Arizona, California, and Utah—at most AAA offices. 

Generally speaking, the seller will sign over the car’s title to you, usually including an odometer reading. Your state may require a separate transfer-of-ownership document and a bill of sale, as well. Even if a bill of sale isn’t required, it’s a good idea to get one—especially if you’re paying cash, since it acts as your supporting document for the purchase. 

After the sale, you must register the car with your motor vehicle department—and don’t forget to update AAA and your auto insurance.

How do I buy a car with a lien or an outstanding loan?

Just because a seller hasn’t finished paying off the loan on the car, in which case the lender likely has possession of the title, doesn’t mean you shouldn’t buy the car. It just means there’s a little more legwork that goes into finalizing the paperwork.

In most cases, the simplest solution is to go with the seller directly to the lender, cash or cashier’s check in hand. They’ll complete the transaction, including paying off the remainder of the loan with your cash, and transfer the title to you.

Another option is that you take over the loan from the seller, provided you qualify for the same loan with that lender.