Buying a used car from a friend or family member seems like a good way to get a deal. After all, you like each other, right? Your friend or relative would never cheat you or steer you wrong, would they?
Well… they might. The fact is that “trust but verify" should be your catchphrase in transactions this big. Another keyword is "transparency," which both sides should honor.
As long as both parties keep their emotions in check and deal fairly, you might get a great price on an excellent vehicle that’s somewhat familiar to you. As a bonus, your relationship remains intact and unchanged.
Besides, what could go wrong?
Seriously, What Could Go Wrong?
We’ll just put this up front. Either accidentally or intentionally, the deal could go south for a number of reasons.
- Unbeknown to you, the car might be a lemon requiring expensive repairs.
- Feelings get hurt during the negotiation process.
- There is a lien on the car that your friend or relative must pay off before you can transfer the title.
- You and your buddy or brother don’t bother to complete a bill of sale, and now your soon-to-be ex-friend or estranged family member wants more money on a handshake deal.
In other words, you need to use all the caution you would use with a car dealer or private seller you don’t know, but with transparency, care, and emotional control.
What’s the Difference Between Buying From a Friend and Buying From a Dealer?
On the one hand, the best reason for buying from friends and family is that you are likely to get a better price. Not just because they like or love you but because they have no overhead like a dealership has. They can get away with asking for a lower price because they aren’t supporting sales people, a building, and an inventory.
On the other hand, private sellers of any sort cannot offer warranties. Dealerships often offer an extended warranty or can transfer an existing warranty to you. It’s also up to you to get the vehicle inspected, arrange for financing if you need it, and to transfer the title, all things a dealer would do for you.
Do Your Homework Before Buying
Just because you are buying from a friend or family member doesn’t mean you should skip the research you should do before buying any car, new or used.
- Carefully research the make and model to make sure it meets your needs.
- Find out standard features as well as add-ons so you can negotiate the price better.
- Look for potential safety issues such as recalls.
- Compare the asking price with other private seller listing for the same or similar vehicles.
Edmunds, Kelley Blue Book, and Autotrader are all excellent sites for research on vehicles and local pricing.
Next, contact the seller and ask for the following information (even if they are related to you):
- The condition of the vehicle
- Mileage
- Accident history
- Reason for selling the car
- Maintenance records
As long as you are researching vehicles on Edmunds, you can plug this information into their trade-in calculator to see how much it’s worth.
Steps to Buying the Vehicle
Your first step should always be a test drive, especially if you have never borrowed or ridden in the vehicle. Not every car fits every person’s frame. You may find it too cramped or too large. It could turn out to be difficult to enter and exit. Or you might discover there isn’t much leg room for passengers, headspace or cargo space.
If you think you may make an offer for the vehicle, get it inspected by a trusted mechanic to ensure all the systems are operable and the car is in the condition your friend or family member says it is. Take a critical look at the tires, engine, and interior for wear and tear as you drive it to the garage for its mechanical inspection.
Speaking of inspections, check to make sure it passed the last required state inspection and the sticker is up to date.
Inspect the title and vehicle history report. Check for liens, which the seller will need to pay off before you transfer the title. Also, check the title for a "salvage" designation and accident history.
Look up the vehicle history report using the VIN to check for other issues that your relative or friend may not be aware of if they are not the first owner of the car. Get the vehicle history report from Carfax. You will have to pay a fee, but it's worth it.
If the car is still under a loan and the seller does not yet own the title outright, you will need to go to the institution of loan origination to perform the title check and to go through the process of purchasing a vehicle that is not yet completely paid off.
It can be done; if you are paying cash, you pay off the car right then and there and receive the title from the lender. If you have financed your payments, your friend's bank or credit union will contact your lending institution to send the title and fulfill the terms of the sale.
Make the purchase and complete the Bill of Sale. This is very important! Without a bill of sale, you cannot prove the terms of the purchase, and legal issues and hurt feelings will ensue. The bill of sale should list the make, model, and year of the vehicle; the vehicle identification number (VIN); the terms of purchase; the odometer reading; your name and the seller’s, typed; all signatures; the date; and a record of comments on the car’s selling condition. Both you and the seller receive copies.
Before you drive off in your new-to-you car, get it insured. Notify your insurance company ahead of time that you intend to purchase a used car from a private seller and pass along the required information. Also, make sure your friend or relative removes their coverage.
Final steps:
- Get all the sets of keys from the seller.
- Take receipt of all the service and maintenance records.
- Ask for the owner’s manual and any warranty information.
If all goes well, you and your BFF or sister/uncle/third cousin-twice-removed are happy with the transaction.
Should you buy a used car from a friend or family member? That's up to you and the seller. Remember that there will be more emotional landmines doing business with someone you know or are related to.
But if you both are fair and transparent with one another, and you follow all the steps above, you should both come out of this on good terms.
