Buying a car from a private seller: a dealer's checklist
A car bought from a private seller can be the best margin on your lot. There's no buyer fee, no transport bill, and often a seller who'd rather have a fair price today than wait weeks on Marketplace. But nobody does the paperwork for you. At an auction the title, the lien and the money run through the auction house. With a person across your desk, every one of those is yours to get right.
This is the checklist we'd run on every private-party car, in the order things tend to go wrong.
Before you make an offer
Most problems with a private-party car are visible before any money moves, if you look.
- Match the VIN three ways. The dash plate, the door-jamb sticker and the title should all read the same 17 characters. If one is off, stop there.
- Match the people to the title. Check the seller's ID against the owner's name on the title. If two owners are listed, see how they're joined: on many titles "and" means both have to sign, while "or" means either can. Ask before you're halfway through the paperwork.
- Read the brands. Salvage, rebuilt, flood or lemon brands are printed on the title, and they change what the car is worth to you and what you'll have to tell your buyer.
- Look at the mileage history. If the title already says the odometer reading isn't actual, or exceeds its mechanical limits, that follows the car to your buyer too.
- Ask about the loan. "Is there anyone else on the title?" is a better question than "do you owe anything on it?" Many sellers don't think of the bank as an owner.
When there's a loan on it
A car with a loan is still a car you can buy. You just pay the lender first and the seller gets what's left.
Ask the seller for a payoff letter from their lender. It shows the amount needed to close the loan, the date that amount is good through, and usually a daily interest figure for each day after. Pay the lender directly, and keep the letter with the car.
What the seller gets = your price − the lender's payoff
| Line item | Amount (USD) |
|---|---|
| Your agreed price | 14,000 |
| Lender's payoff good through Friday, paid to the lender directly | −9,850 |
| Paid to the seller | 4,150 |
If the payoff is bigger than your price, say $15,200 against $14,000, the seller is upside down and owes the $1,200 difference. Settle who pays it, and how, before anyone signs. You don't want to discover it after you've paid the lender.
Once the loan is paid, the lender releases the title, which can take days or weeks. The car can be on your lot in the meantime, but know your state's rules before you put it on a deal without the title in hand.
The paperwork
Every state does this a little differently, but the same few documents come up again and again:
- The title, signed over by every owner who has to sign it, with the price and date where the state asks for them.
- A bill of sale, with the seller as the seller and your dealership as the buyer.
- The odometer disclosure: the mileage the seller writes down and signs for, on the title itself or on a separate statement, depending on your state.
- A notice of sale or release of liability, where your state has one, so the seller isn't on the hook for what happens after the car leaves them.
- A power of attorney, when the seller can't sign a form in person or the lender still holds the title.
Your state's official forms, linked to its DMV, are on our paperwork pages. Keep copies of everything, the seller's ID and the payoff letter included, with the car.
Pay with a trail
Pay by check or bank transfer, never in cash, and write down who got what: the lender's payoff, the seller's share, and any shortfall the seller paid you. Note the check number or transfer reference and the date for each one. If the title shows up late or a payoff doesn't clear, that's the first thing anyone will ask for.
Into inventory at its real cost
The price you paid is the start of the car's cost, not the end of it. Inspection, keys, a detail and any recon all belong on the car from the day you spend them, the same as for an auction car. Our true profit guide covers what belongs in that number.
How GARAGEBIRDS handles it
In GARAGEBIRDS a private-party car starts as a purchase. You record the seller and any co-owner, who are saved as contacts, the car by VIN with its specs, the mileage the seller discloses, the title with its brands, and any lien. Enter the payoff and the price, and it works out what the seller gets, or what they owe, as you type, along with how each payment is made.
From the purchase, the state's transfer forms fill in: the bill of sale, the odometer statement, the notice of sale and the power of attorney, wherever your state has them, with the seller as the seller and your dealership as the buyer. Your own purchase forms fill in too, through Smart Print Forms, and there's a one-page purchase record for both sides to sign. The signed pages stay on the purchase.
Complete it, and the car goes into inventory as a draft with its cost, specs and title already filled in, counting the days until the title arrives. If the seller walks before the paperwork is final, mark it lost. If it falls apart afterwards, unwinding it takes the car back out of inventory. Private-party purchases are on Pro; here is how it works, with screenshots.
In GARAGEBIRDS: Private-party purchases — buy from a private seller, with the state’s transfer forms and the car into inventory at its cost (Pro plan).