Selling or Buying a Used Car

Published by Zachary Langan and Robert W. Huntley, CFP®, CHFC

Many people will wade into the great adventure of buying or selling a used car themselves. It often brings better economics. However, it also comes with pitfalls. Here are some tips to be aware of on either side of the transaction:

You are the SELLER:

1. Do your homework before setting your price. You can find a lot of information for resale pricing at sites like edmunds.com or www.kbb.com– You can even print out a window sticker that lists your car’s relevant features and model information. In addition, you can search sites like www.autotrader.com or even Craigslist to compare similar condition examples of your car make/model are selling for in the area. Doing this work ahead of time helps you set a realistic price.
2. Make sure you’re ready to document the sale properly. In Texas, you want to do two things. First, you want to create a Bill of Sale which includes the buyer’s name, address and buyer’s signature. This will document your selling of the vehicle on a certain day for a certain price.  Second, you want to submit a Vehicle Transfer Notification within 30 days of the sale using an online form from the Texas Department of Motor Vehicles. This removes any liability from you for anything the new owner may do after buying the car but before they have registered the title. These two documents will be very helpful if any surprises happen in your vehicle post sale such as tickets or criminal activity.
3. Make sure you cancel and remove any toll road tags before turning the car over to the new owner. You don’t want confusion on toll charges being incurred by someone other than you.
4. Be cautious about putting the car in privately-owned, visible parking lots or other places not intended to sell a vehicle. It’s great for additional exposure to drive-by traffic. It’s not great to pay towing and impound fees. It happens all the time.
5. Have a friend with you when meeting a stranger to show them the car. When they test drive your vehicle, take a picture of their driver’s license and hold the keys to their car while they’re gone. Be safe. Be smart.

You are the BUYER:

1. See #1 above. But this time you are going in as an informed buyer. You have a good idea of fair market value because you’ve done your homework.
2. As a pre-sale negotiating chip, require the seller to let you pay a qualified mechanic to inspect the vehicle. This typically costs $100 to $150 to have the vehicle put up on a rack and given a thorough going over. This is well worth the time and money and can be negotiated into the purchase price at the very end of the deal as a prerequisite for buying the car.
3. If possible, see if you can keep the car overnight. It’s much better to drive a vehicle like you would during your normal use. Does it fit in the garage? Is it quiet when you’re on the phone and on the road? Do the bells and whistles really matter as much as you thought they would?
4. If buying the vehicle from a private seller, be sure to have the seller sign the bottom of a Texas Title Application (Form 130-U) and re-register the car in a timely manner. Getting things documented properly is important. This will also protect you from the seller claiming the vehicle was stolen.
5. If you’re buying the car from a dealer, don’t make the final negotiations while you’re still at the dealer. Instead, tell them you’ll think it over and then handle your negotiations over the phone. This levels the field and uses your time efficiently. If you can reach an agreement over the phone, then they can have much of the paperwork ready for you when you come in to finalize everything. This saves time and should help you get a better overall price.

In the end, it ultimately boils down to being informed and doing your homework before selling or buying. An educated buyer/seller always comes out of the process better.