Huge Mistakes to Avoid When Selling a Used Car

When you search for information about how to sell a used car, or mistakes people make when selling a used car, you'll often come up with sites that caution you that you may be leaving money on the table if you don't do obvious things, like research the value of your vehicle, wash the car before selling it, or fail to practice a sales pitch.

But as much as you want to maximize the sale price, there are much bigger mistakes that you can make when selling a used car. Some mistakes could cost you thousands of dollars, or even result in your being sued.

Don't Let a Buyer Drive Off With Your Car

If you're selling a vehicle, it is entirely reasonable that a car buyer is going to want to test drive your car. It is reasonable for your buyer to ask to have the car inspected (at the buyer's expense) by a mechanic. But until the car is actually titled to the buyer, it's a bad idea to let the buyer drive off in your car. They can test drive the car, but with you in the passenger seat.

You should also ask to see the buyer's driver's license, both to verify that the buyer is licensed and so you can know that they are giving you their actual name.

Look at it this way: What easier way exists to steal a car than approaching somebody who is selling a car, stating that you need to test drive the car before you make a decision, then driving away with a set of keys? Beyond that, what if your buyer wants to do burnouts in a parking lot, or engage in other damaging activity, but prefers to cause the damage to somebody else's car?

Financial Mistakes People Make When Selling Cars

  • Accepting Non-Cash Payment: A used car seller should strive to be paid in cash. If that is not possible, a money order may be sufficient, but be careful about accepting out-of-state money orders, or the possibility that a money order is forged or altered. Accepting a personal check can be very risky. Never accept a third party check.

  • Agreeing to Take Payments: When you sell a car, you should sell to a buyer who can afford to pay the full purchase price. If you agree to take payments, be prepared for the probability that your buyer will make late payments, miss payments, or not make any payments at all.

  • Keeping the Title in Your Name: Often in association with a payment agreement, some sellers will keep the title in their own name while allowing the buyer to take possession of the vehicle. That's fine... if you like the idea of paying somebody else's parking tickets, impound fees, toll road tickets, potentially being sued if the buyer gets into an accident, risking that your insurance company will deny coverage of claims, and the like, but odds are you don't.

  • Taking Payments for Third Parties: Sometimes an out-of-state or international buyer will tell a car seller that they're including a shipping fee in the money order, and that the seller should cash their check or money order and forward the fee to the shipper. After delivering the car and payment to the shipper, the seller finds out that the check isn't valid and they're out not only the value of the car but also the amount that they paid to ship their car to a thief.

I've seen some people who finance cars for a buyer properly transfer title to the buyer while reserving a lien. But if the buyer stops paying, they're consistently surprised by how cumbersome and expensive it is to legally repossess a vehicle and to sell it to recover the money owed.

If your buyer doesn't have sufficient credit to get a loan from somebody else, it's not in your interest to take on a very high risk loan - and if they do have credit, you should let somebody else take the risk while you take the cash.

Legal Mistakes People Make When Selling Cars

  • Failure to Properly Retain or Transfer Title: Research the laws of your state and follow proper procedures to cut off your liability for the vehicle after the sale.

    • Retain the License Plates: If you're in a state in which the seller must remove and retain the license plates when selling a vehicle, make sure you don't let the seller drive off with your license plates.

    • Document the Transfer With the State: If you are in a state that requires or permits you to register the transfer of a vehicle with the state, make sure you complete that process so that you're protected from liability or possible penalties if the buyer fails to register the vehicle.

    If you're in a state that requires you to retain the license plate, make sure you remove and retain the plate. Don't allow a buyer to "borrow" a plate, even if they claim they only want to drive to the DMV to register the vehicle. If they want to register the vehicle at the time of sale, close the deal in the parking lot of the DMV.

  • Failure to Follow Your State's Emissions Laws: If your state requires that you prove that a used car can pass an emissions test, make sure that you provide documentation of the successful test to the buyer at the time of sale, and make sure that you keep a copy of the emissions test results for your own records.

Failure to Properly Document a Used Car Sale

  • Failure to Use a Bill of Sale: Although it's not required, a bill of sale is the best way to remove any doubt that a vehicle is being purchased "as is", with the seller having no later basis to claim that you made false or misleading statements about the vehicle.

  • Failure to Keep Records of the Sale: When you sell a car, make sure that you keep copies of all of the completed paperwork, including the fully executed vehicle title.

  • Failure to Register the Sale With the State: If you're in a state that requires or permits you to report a car sale to the state, make sure that you report the sale in a timely manner.

If an issue arises after you sell a car, you should have a complete set of documents to show that the sale occurred. Even if you don't have ready access to a copier or scanner, you can take a picture of the executed documents with your cell phone.

Copyright © 2016 Aaron Larson, All rights reserved. No portion of this article may be reproduced without the express written permission of the copyright holder. If you use a quotation, excerpt or paraphrase of this article, except as otherwise authorized in writing by the author of the article you must cite this article as a source for your work and include a link back to the original article from any online materials that incorporate or are derived from the content of this article.

This article was last reviewed or amended on May 4, 2018.