What are the Risks of Buying a Car Privately?
Buying a second-hand car through a private sale purchase rather than a dealership is usually cheaper. You also usually get a car that's been carefully looked after, as the owner will get a better price at private sale than from a dealer trade-in.
However, there are some risks of buying privately. Here we'll take a look at what those risks are, and what you can do to minimise them.
Understanding the risks of buying privately
When you buy a car through a private sale purchase, you should be more careful about checking the vehicle before you sign the transfer papers and pay the agreed price.
1. Is the car mechanically sound?
When buying a car through a private sale purchase, it's essential to take a careful test drive.
There's no cooling-off period on private sale purchase. Once you sign the transfer of registration and pay the agreed price, that's the end of your interaction with the seller.
There's also no warranty. When you buy a used car from a dealership, there's usually a limited warranty covering the vehicle for a short period, which varies by state. This means that it's even more important that you check the car for damage or problems before the purchase.
There's also no protection under Australian Consumer Law, so you are taking full responsibility for the quality of the vehicle purchased and the price agreed on.
2. Car under finance or stolen
When you buy a car through a private sale purchase, you have to perform checks yourself to ensure that the car isn't under finance, hasn't been written off, and isn't stolen.
The risks of buying privately here are that you won't have full legal title to the car, it could be repossessed by a lender or the police, or it may not be in the condition you are lead to believe. It's easy to mitigate the risks of buying privately with a quick PPSR search.
A Personal Properties Security Register (PPSR) search. It only costs $3.40, and you'll need the VIN, a unique 17 character number found on the chassis of the car, usually under the bonnet or in the driver's door space. You can get this number when you view and test drive the car - don't rely on a photograph.
3. Settling finance requires the buyer's cooperation
You can definitely get finance to purchase a used car, whether you choose a personal loan or a secured car loan.
If you use a secured car loan to purchase a private sale car, the funds for the purchase are paid directly to the seller's bank account.
This means that as well as generating an invoice for the car (which will be done for you by a good car loan broker when you pass on the car's details), the seller will need to provide proof of ID and their bank account number.
Using a personal loan, the funds are paid to your account. The catch is that an unsecured loan might attract a higher interest rate.
4. Dealing with strangers
It's rare that you'll know the person you buy the car from. This usually means that you'll have to travel to their home to view the car, and the owner will usually accompany you on a test drive.
Before you commit to a place and time to view the car, it can be helpful to talk to the person over the phone. This allows you to ask any questions you have that aren't covered in the online advertisement, and also to make an assessment of the person selling the car.
If you can take someone with mechanical knowledge along when you view the car, you'll cover off both safety and the mechanical soundness of the vehicle.
5. Roadworthiness and registration
When you purchase at a private sale, the seller should provide you with a roadworthiness certificate in most states. It's not required in every state, so make sure that you know what to expect in the state where you make the purchase.
You'll also need to sign a transfer of registration, and then lodge your part of the transfer at the Motor Vehicle Registration office w, and pay the stamp duty on the purchase.
You can finance a private car purchase
If you're considering buying second hand rather than brand new, and you'll need finance to complete the deal, talk to your car finance broker about your options.
You can organise a car loan pre-approval that can be used at a dealer or private sale to give you flexibility if you haven't found the car you want to buy yet. You can also talk to us and get a free quick quote to know your options.
You may find the following information useful too: