Buying a used car from a private seller: 5 crucial questions answered

Used cars come with character, there’s no doubt about that. And the truth is, if you’re opting to buy through a private seller, it’s often the cheaper (and sometimes more convenient) option. 

And in 2021, used car sales are on rise with many Aussies avoiding public transport or looking to hit the road and "holiday at home."

However, whether you go through carsales.com, Gumtree or Facebook Marketplace there is an element of risk in buying a preloved vehicle privately. Unlike with a used car dealership, the car you buy will have no Guarantee or Warranty attached to it. Similarly, any faults with the vehicle aren’t covered under Fair Trading and you’ll have to do all the paperwork in relation to the transaction yourself. 

That’s not to say that buying a used car privately isn’t a viable option, because it is. It’s just about being equipped with the knowledge you need to avoid driving home in a car that’s not up to scratch. 

So its with this in mind that we answer five of the top asked questions about buying a used car from a private seller: 

Question 1: Is a used car from a private seller really cheaper than from a dealer?

In most cases, you’ll snag a lower price when you buy a used car from a private seller. 

Essentially, when buying a used car privately you are less likely to face additional costs associated with buying one from a dealership (such as advertising costs or commission). But, what you save in money, you often give up in things like a warranty and Fair Trading protection. 

Before buying via a dealer or private buyer it is a good idea to get price estimates from both so that you can weigh up the cost savings versus the added protections before making your final decision.

Question 2: Can I get a car loan for buying a used car? 

Yes, many lenders will allow you to borrow money to purchase a used car from a private seller. Depending on the age of the car, you may be able to take out a secured car loan. You may have to opt for an unsecured personal loan if the car is generally older than 3 years.

Essentially, lenders view private sales as more risky compared to purchases made through a dealer, as there is more likelihood of fraudulent activity. If a lender allows you to take out a secured car loan, you’ll have to provide them with detailed information about the vehicle. This could include things like: 

• The current registration certificate
• The seller’s drivers license
• Proof of seller’s banking details 
• Current financier payout letter (where needed)
• Vehicle inspection report
• A copy of the sale agreement between you and the seller

RELATED ARTICLE: 3 key things to look for in a car loan 

Taking out a secured car loan is generally the cheaper option. However, they can also come with restrictions when it comes to the age of the car. So, if you are unable to be approved for a car loan, you may want to consider an unsecured personal loan instead. While these loans usually come with higher interest rates, you don’t have to put up any assets as collateral (including the car you intend to buy). That way, the lender cannot repossess the car if you end up defaulting on your loan. 

Question 3: What checks do I need to do when buying a used car privately?

There are plenty of things you can check before and after you check out the vehicle you intend to buy. And it could end up saving you time and money. 

These include: 

• Checking the vehicle registration: This is free and will include the rego expiry date, if its been suspended or cancelled, any restrictions, any concessions and the CTP insurer and policy expiry date. 
• Getting a vehicle history report: For a small fee, this report will show if a vehicle has been written off, been stolen, the number of registered operators, the vehicle’s past use (taxi/hire car), the vehicle's first registration date. 
• Checking the Personal Property Securities Register (PPSR): This is a national online register that allows you to register and check security interests in personal properties - such as cars, boats and artworks. 
• If you have a P1 or P2 licence making sure the car isn’t restricted: This can be done online for free. Essentially, you want to make sure that the vehicle isn’t high performance, doesn’t have an unapproved modified engine or a power to tare mass ratio greater than 130kW per tonne. 
• Checking the details online matches the car: It’s important to note if the features and registration information provided in the ad is correct. When you see the car, ask for documentation and test any features to make sure they are functional. 
• Asking a mechanic to check the car: It’s always a good idea to have a professional look at a used car when you buy it privately. While this may cost you a few hundred dollars, there may be a technical issue you don’t pick up on or the price may not match the functionality of the car. This will save you money later down the track in repairs. 

Question 4: Which questions should I ask the seller when buying a car? 

Going unprepared without questions to ask a car seller is never a good idea, as it could be a one way ticket to being ripped off. From physical details about the car and its history to the reason it’s being sold, there are an array of things you should check before sealing the deal.  

Here are some things you should ask the seller: 

• How long have you owned the car? Did you buy it secondhand?
• What is the history of the car? Any damage, crashes or repairs? 
• Why are you selling the car? 
• What’s the odometer reading? Do you have records of the mileage? 
• What features does the car have? Are they all functional? 
• How much registration does the car have? Does it have a current roadworthy certificate? 
• Is there outstanding finance or is it subject to a hire purchase agreement? 
• Has the car been modified recently? Have any parts been replaced? 
• Are you prepared to negotiate the price? 

It’s important to remember that while a seller may seem trustworthy it’s always a good idea to tread on the side of caution. Request documentation of whatever claims the seller makes and ensure you take the car for a test spin, or two. 

Question 5: What type of insurance can I get for a used car? 

Whether you buy a brand new car or a used one, there are plenty of options when it comes to car insurance. 

It’s important to note that you must have compulsory third party insurance CTP, in order to register your car. This type of insurance covers your liability for any injury or death that you cause to others while driving.  In some states this is included in the price of the rego, while in others you must take it out separately.

If you want to insure your car, you have two options (on top of CTP): third party property insurance or comprehensive. 

• Third party property is the cheaper option, however you are only covered for at-fault accidents where the other driver’s property is damaged. It does not cover damage to your car in the case that you are at fault. 
• Comprehensive is the more expensive alternative. It is the highest level of insurance and covers both damage to your car and other’s car in the case of an accident. 

It’s important to remember that insurance premiums tend to be higher for used cars (as they are more risky). Your quote will depend on a range of things like where you live, age, the colour of car etc. To find out more about the cost of insurance, check out our Car Insurance Report 2020. 

RELATED GUIDE: Buying a car: A guide to getting your first set of wheels 

Already have your eye on a pre-loved car and need to weigh up your finance options? Check some great deals below or head to our used car loan comparison table for more!