As enticing as it may be to buy a brand new car off the lot, it may not always be a good idea, financially speaking. Depending on your financial situation, a used vehicle might fit better with your budget.
Buying used is an awesome way to save money without sacrificing quality. But while your first thought might be to look at used car lots, don’t be scared to buy privately. When done safely and properly, buying a used car from a private seller can be a great way to save some money while also getting a great car. This article will walk you through the steps you should take and some tips you should follow when purchasing a used vehicle privately in Ontario.
Key Points
- A private car sale is one in which a used vehicle is sold by the owner directly to the buyer.
- Buying a used car from a private seller comes with a few benefits, including lower prices and more wiggle room for negotiation compared to dealerships.
- Some risks are associated with buying privately, such as potential issues with latent defects, no warranties, and potential odometer fraud.
- You can finance the purchase of a used vehicle from a private seller with a loan from a bank, credit union, or alternative online lender.
What Is A Private Sale?
A private car sale involves purchasing a vehicle directly from the owner, without a dealership or other middleman. In a private car sale, the seller and buyer negotiate the price and terms of the sale and complete the transaction independently, including the transfer of ownership and registration.
Steps To Take When Privately Buying A Used Vehicle In Ontario
If you’ve decided to purchase a vehicle from a private seller in Ontario, follow these steps.
Step 1. Set A Budget
Figure out how much you’re able to spend on a vehicle, and be sure to factor in costs such as insurance, registration, sales tax, gas, maintenance, and repairs. Depending on your financial situation, you’ll need to determine whether you’ll buy in cash or if you’ll need to take out a loan to finance the vehicle.
Learn more: Is Your Monthly Car Payment Too Expensive?
Step 2. Research The Vehicle
Before you can privately purchase a vehicle, you need to know what sort of car you want. This will involve researching the make, model, and features of several different vehicles so you can ultimately decide on one that will best suit your needs. There are many great review and rating sites online that can give you insight on the reliability and features of almost any car.
Step 3. Find A Reputable Seller
Once you have an idea of what kind of car you want (or have narrowed it down to a few), you are ready to start looking for a sale. Generally, online listings are a great place to look, with a plethora of cars for sale in most major cities. Just be wary of a deal that sounds too good to be true.
Step 4. Verify The Vehicle’s History
Request the vehicle identification number (VIN) from the seller and run a history report using a service like CARFAX or AutoCheck. A vehicle history report can help you find out details about a car’s past, including accidents, repairs, liens, and previous owners, and odometer discrepancies. If you’re not comfortable with what the report reveals, you might want to walk away and keep looking.
Step 5. Inspect The Vehicle In Person
You’ll want to physically have a look at the car yourself to make sure it appears in good condition and matches the vehicle the seller has listed. Look for things like damage, leaks, rust, or mismatched paint on the exterior. On the interior of the vehicle, inspect the electronic components, dashboards, and seats.
When meeting with the seller to inspect the car, always meet in a public place during the day. Ideally, you should meet at a police station, as they typically have areas dedicated specifically for private sales.
Step 6. Test Drive The Vehicle
As long as you’ve done your due diligence to make sure the seller is legitimate and you feel safe, take the car for a test drive. Pay attention to the car’s performance, including the steering, brakes, transmission, and acceleration. Listen out for strange noises from the engine and brakes.
Step 7. Get A Pre-Purchase Inspection Done
Hire a trusted mechanic to inspect the vehicle before you commit to buying it. While you may have conducted an inspection yourself, there may be underlying issues with the car that you may not have noticed if you’re not a trained professional. The mechanic will look for issues that could be expensive to repair.
Learn more: Do You Need a Pre-Purchase Vehicle Inspection When Buying a Used Car?
Step 8. Negotiate The Price
Do an online search of similar listings to see what they’re going for. This will give you a clear idea of the vehicle’s fair market value so you don’t end up paying more than you should. Sites like Auto Trader and Canadian Black Book are a couple of good websites to check out.
You can also use the pre-purchase inspection report to justify a lower price if any issues are discovered.
Step 9. Get Insurance
In Canada, auto insurance is mandatory. Get in touch with your insurance provider and set up a policy for the vehicle before you take possession. You’ll want to know if the car is insurable and how much you’ll need to pay. Plus, you’ll need coverage before you can start driving the car after the title exchange hands.
Step 10. Complete The Transaction
At this point, payment is required. Since you’re buying from a private seller, you’ll need to provide payment in full upfront.
While you can give cash or send an e-transfer, this is not recommended. Instead, consider paying in a more secure format, such as a certified cheque or bank draft.
Step 11. Register The Vehicle
Visit your provincial transportation office to transfer ownership of the vehicle and register it in your name. You’ll need a bill of sale, a vehicle permit with the application to transfer, and the Safety Standards Certificate. Once you have all the necessary documents and the car, you can register it to your name and take possession.
How To Finance The Purchase Of A Used Car From A Private Seller
Unless you have the cash available to pay for the vehicle in full upfront, you’ll need to borrow money. If so, follow these steps to get financing to buy a used car from a private seller:
Step 1. Check Your Credit Score
Lenders assess your creditworthiness before approving a loan. A higher credit score not only increases your chances of loan approval but it can help you secure a lower interest rate and better loan terms. You can quickly find out what your credit score is for free using Loans Canada’s CompareHub.
Step 2. Compare Lenders
Use an online loan comparison site like Loans Canada to quickly find lenders in Canada that can provide you with financing to cover the cost of a used car. Based on your credit score and financial profile, the platform will populate a list of lenders and their offers. Be sure to compare the lenders’ interest rates, loan terms, and overall fees.
Step 3. Gather Required Documents
You’ll need to supply the lender with certain documents along with your loan application, such as the following:
- Photo ID (driver’s license, passport)
- Proof of residency (utility bill, lease agreement)
- Proof of income (pay stubs, bank statements, tax returns)
- Proof of employment (employment letter)
Step 4. Review The Loan Terms
Make sure you understand all terms of the loan before you sign the contract, such as the following:
- Interest rate
- Loan term
- Monthly payment amount
- All fees
Step 5. Apply For The Loan
Once you’ve selected a lender, submit your loan application and all relevant documents. Approval time varies based on the lender. Banks tend to take a few days or more, while online lenders can offer same-day decisions.
Step 6. Pay The Seller
Using the funds from your loan, you can act as a cash buyer with the private seller. You’ll then pay for the vehicle, have the title transferred in your name, and begin making payments towards repaying your loan.
Where To Get Financing For A Used Car From A Private Seller
Financing for a used car from a private seller is available from the following sources:
- Banks. These traditional lenders typically offer lower interest rates for good-credit borrowers. However, getting financing from these sources may be more difficult for those with bad credit.
- Credit Unions. You may be able to get a good deal on financing from a credit union, though you’ll need to be a member. Some credit unions may work with borrowers with credit scores that fall just under the “good” credit score threshold, though many may require good credit.
- Online Lenders. If you have bad credit, applying with an online lender may be the way to go. These alternative lenders have more flexible loan criteria and feature a quick approval and funding process. However, they typically charge higher interest rates, making their loans more expensive compared to bank loans.
What’s The Difference Between A Used Car And A Certified Pre-Owned Vehicle?
A used car is a previously owned vehicle that is sold by its owner, which may have some wear and tear and may come with some form of maintenance history. On the other hand, a certified pre-owned (CPO) vehicle is one that has undergone a comprehensive inspection and restoration process by a certified dealership or manufacturer.
While a used car may come with a vehicle history report and some inspection, a CPO vehicle is typically more likely to be reliable because of its more thorough inspection and refurbishment.
In short, CPO vehicles can provide more protection against potential issues compared to used cars purchased directly from a private seller.
How To Avoid Getting Scammed?
Dealing with private sellers may leave you more vulnerable to scams compared to buying from a reputable and well-known dealership. To help you avoid getting scammed when buying a car from a private seller, consider the following tips.
- Request A Vehicle History Report. As mentioned, a vehicle history report will give you important information about a vehicle’s past. You can order a report through a service like CARFAX using the vehicle’s VIN.
- Be Wary Of Sellers Who Have Certain Restrictions. Be careful if the seller won’t let you see certain parts of the car or won’t let you test drive it. If they can’t remember or refuse to provide you with information pertaining to all the maintenance the car has been through, this is also a red flag.
- Compare The Mileage With Maintenance Records. Some scammers roll back the odometer to show fewer kilometers than what the vehicle has actually driven. Compare the odometer reading with the maintenance records to ensure they match.
- Look Out For VIN Cloning. Some scammers copy a VIN from a legitimate vehicle and place it on a stolen or salvaged car. To protect yourself from this scam, check the VIN in several locations on the vehicle and confirm it with a vehicle history report.
- Don’t Pay Before You Get The Vehicle. Once the keys and all the forms are completed and signed, that is when you should pay. This way, you’ll ensure they don’t run off with your money.
Final Thoughts
Buying a used car in a private sale can be a great way to save money, but it requires some homework and due diligence. Make sure to obtain a vehicle history report to verify the vehicle’s past, perform the transaction in a public setting, and look out for reg flags that could be signs of a scam. And when it comes to paying for the car, be sure to choose a secure form of payment and never pay without ensuring you’re getting the car you agreed to.
