How to Pay for a vehicle purchased from a Private Seller

Privately selling or buying a car (peer-to-peer) can be a stressful experience, especially for first-timers. Topping the list of worries is exchanging funds at the time of sale. There are 7 primary methods for the purchasing transaction.

1.      Cash

2.      Certified Check

3.      Cashier’s Check

4.      Bank Transfer

5.      Escrow Service

6.      Digital Payment Platforms

7.      Private Seller Exchange

Cash

Cash is easy and quick. It also ensures privacy because no other person or entity is involved. However, exchanging cash between relative strangers poses a degree of risk.

Major Advantage: Immediate transfer of funds

Major Disadvantage: Risk of carrying a large amount of cash

Certified Check

For a personal check to be certified, the bank verifies the funds are in your account, set them aside, and then marks the check as certified. In other words, it guarantees the account balance will cover the check when presented for payment. If the check is deposited at a different bank, it must be processed which take time and delays the seller’s payment.

Fraud is possible because the certification can be forged. Therefore, the buyer’s check should be verified with the issuing bank before releasing the title or the car. In general, we advise sellers to avoid certified checks because of the possibility of fraud and the potential for delayed payment.

Major Advantage: Safer than carrying a large amount of cash.

Major Disadvantage: Fraud is possible.

Cashier’s Check

To get a cashier’s check, you give the bank the funds and the bank then issues a check for that amount from its own account. Other financial institutions treat a cashier’s check as if it is cash.

A cashier’s check is more secure than a certified check. Other banks consider a cashier’s check as cleared funds.

It is possible to counterfeit a cashier’s check. Meeting the buyer at their bank to see them obtain the cashier’s check reduces that risk.

Major Advantage: Other banks treat cashier’s checks as cash.

Major Disadvantage: No check is foolproof.

Bank Transfer

Using a bank transfer removes fraud concerns and ensures a safe transfer of funds. That’s because it is an exchange between the buyer’s and seller’s banks. The buyer transfers money from an account in their bank to the seller’s account. The bank transfers might take 24 hours.

Major Advantage: Trustworthy and secure funds transfer.

Major Disadvantage: It can take 24 hours.

Escrow Service

An escrow service protects both parties.  An escrow service is a neutral third-party who holds the buyer’s funds until the vehicle exchange is complete, then it releases the funds to the seller. If the sale goes wrong, the escrow service returns the funds to the buyer.

The escrow fee can be as much as 2% of the sale price.

Major Advantage: Lower risk.

Major Disadvantage: Costly fee.

Digital Payment Platforms

Digital payment platforms like Venmo, PayPal, and Zelle are convenient, quick and secure. Each platform requires the buyer and seller to have verified accounts. The fees can be steep. For example, Venmo charges sellers 1.9% of the transaction. These services may have transfer amount limits.

Major Advantage: Convenience.

Major Disadvantage: Both parties must have verified accounts.

Private Seller Exchange

Some online vehicle ad websites provide a private seller exchange.  For example, Autotrader Private Seller Exchange (PSX) is an online peer-to-peer vehicle-buying marketplace where consumers can buy and sell cars with safe, secure transactions while taking advantage of a wide range of popular services. PSX is a secure marketplace where both seller and buyer build a bridge of trust through investigation, verification, communication.  The transaction is expedited and validated by PSX. Everything except for a test drive can be accomplished online.

PSX acts as a third party and guarantees the integrity of the money transfer. Sellers register information about their vehicle. The fee will be no more than $99 or 0.99% of the final transaction price, whichever is greater.