The Safest Way to Pay for a Used Car

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Paying by cash provides little protection and offers no paper trail.
Paying by cash provides little protection and offers no paper trail. (Image: Stockbyte/Stockbyte/Getty Images)

Buying a used car carries additional risk because you may not be able to buy it from official retailers. Fraudsters may use your information in unauthorized ways, take your money and never deliver the car to you. Before you buy the car, you should meet the seller and confirm his identity by consulting a phone book or directory assistance. You should then get a mechanic to inspect the car, obtain a vehicle history report and check the car title. Choose a payment method that minimizes your risk.

In Person

Pay a deposit for the used car by check or bank draft if you are serious about buying the car and want to hold off other prospective buyers, but still want to conduct various checks and inspections. Make the check out in the seller's name. Avoid using cash because it leaves no paper trail for tracking the payment.

Get a written receipt for the deposit with a signature of the seller. The receipt should contain the car's details, the payment details and any conditions to the deposit, for example if the full payment is subject to a mechanical inspection.

Pay the full amount once you have completed all your checks and inspections. Do this by check or bank draft.

Get a written, signed receipt for the full payment. The receipt should detail the purchase price, the date, whether there is any warranty, odometer readings and the contact information of the seller so you can contact him in case any problem arises with the used car.

Online

Pay the seller through the website on which you met the seller. You may only be able to use your credit card, but your seller will not get your credit card details. Only enter your credit card details if the website uses Secure Sockets Layer security during checkout.

Contact the Better Business Bureau for details on any particular online payment service that you suspect to be fraudulent.

Use an online payment service, such as PayPal or Escrow.com, if the used car website does not offer a secure payment method, only after the Better Business Bureau confirms its safety. Such a service usually keeps proof of your payment so you can trace the transaction. You may also be able to resolve any issues through the service provider if anything goes wrong with the transaction.

Tips & Warnings

  • Don't provide your credit card or social security number to the seller.
  • Don't write a check to another individual even if requested to do so by the seller.

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