How to pay for a used car from a private seller

You’ve agreed on terms but are now unsure how to seal the deal. Here’s how to best go about trading money for a used car with a private seller

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A used car transaction is an exciting time for both buyer and seller. The buyer finally found the perfect car at the right price and the seller is no doubt enthusiastic to part with car for cash. 

But an awkward part of used car trading is always the transfer of cash for car and if you don’t think the process through you might find yourself in trouble. 

We’ve all heard the stories about the Nigerian prince who works on an oil rig and is happy to pay full price for the car via a Western Union money order sight unseen, yes?

It sounds like a joke, but the reason the story is so prolific is that many have fallen for it. Scams are prevalent in all transactions and selling or buying a used car is no different. 

Online marketplaces like Facebook Marketplace and Gumtree are a ripe hunting ground to catch buyers and sellers out, so ensure you back yourself with a proper understanding of how to complete a transaction. 

In order to quickly and safely process a transaction, there are just a few ways that you should be doing it. 

One of the safest ways to exchange money that provides peace of mind for both parties is perform a bank transfer while inside an actual bank.

In that circumstance, the seller knows that the buyer has the cash to honour the transaction, and the buyer can walk away with the car as soon as the seller gets confirmation that the trade is done.

Both buyer and seller are on camera at the time of transaction so no funny business can occur. Of course, a receipt is always worth having too.

The buyer can also provide a bank cheque, which ensures the correct amount is in the account at the time of drawing up the cheque and won’t bounce as a personal cheque could.

It is true that bank cheques can be stopped, but this is difficult and will raise eyebrows for the purchaser.

Let’s not forget cash either. Generally, for smaller sales (say less than $10,000) cash is still a good (and instantaneous) way to pay for something – but there are a few ways you should help yourself.

Firstly, the handover should be done at a bank, whereupon the full amount can be withdrawn or deposited into an account, handled by a bank teller. That way you can ensure no notes have been forged and, of course, the correct amount is there.

It is worth noting that there are plans to change the maximum amount you can pay cash for something to $10,000. The $10,000 cash payment limit has not yet been passed as law, though keep in mind that it will likely be passed by Parliament in the future, rendering cash payments of purchases over $10,000 unviable. 

We’d advise against electronic transfers through mobile banking or similar as the funds will likely take 1-2 business to clear, meaning more time for the buyer to cancel the transfer.   

As always, it (quite literally) pays to do your due diligence and ensure the car you’re buying is in fact owned by the seller, likewise a check on whether there’s any finance owed is also smart.

Only do a transaction on terms you’re happy with or don’t do it at all.


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