Purchasing a vehicle can be one of the most costly purchases you will ever make, so it’s important to be a smart buyer. This is especially true if you are purchasing a vehicle over the internet. Today’s technology has made purchasing a vehicle quicker and easier than ever before. With the ease of using the internet, a smart buyer must ask a number of questions, gathering important information before starting the buying process and, ultimately, closing the deal. In fact, a number of these questions needs to be asked, or at least pondered, before you go online.
This Smart Buyer Guide is designed to provide you, the consumer, with some basics to consider before buying a vehicle online. Here’s a checklist of questions and issues to consider before entering into an online vehicle purchase:
Who are you dealing with on the internet?
Is the seller a vehicle dealer or a private party?
Is the seller a dealer licensed by your state or another state?
Who is the owner of the vehicle—the dealer or the private party?
Where is the vehicle currently located?
Where am I purchasing the vehicle?
What are the sales tax(es) due on the vehicle?
Who pays? Buyer, seller, or both?
Where, how, and when is the payment made?
Has the vehicle been inspected prior to purchase?
Will the vehicle pass a safety inspection in your state?
Will the vehicle pass a smog (emissions) inspection in your state?
Has the vehicle been involved in a collision?
Does the vehicle’s title carry a brand of any kind, such as a “salvage” brand?
Are there any outstanding safety recalls for the vehicle?
How will you get the vehicle to your home?
When do you get title to the vehicle?
Who has the legal title to the vehicle?
Is there a lien on the vehicle?
How will the lien be paid off, and who is responsible for payoff, prior to your purchase of the vehicle?
What happens if something goes wrong with the purchase? Where do you go for help?
The following information is important to know as you consider the questions above.
Who are you dealing with on the internet?
This is perhaps the most important information you need before getting too far into the deal when purchasing on the internet. Is it a dealer? What is a “dealer”? Most states define a dealer as someone who is in the business of buying and selling vehicles.
Is it a dealer? First, what does the internet advertisement say? Some states require a dealer to disclose this information, but many do not. Even if you think you are dealing with an individual or private party, you may actually be working with a dealer. Look for information that may identify the seller as a dealer (dealer license number, name, and so on). Second, in what state or states is the dealer licensed to do business? Again, check the advertisement or website for this information.
Working with a dealer may be “safer” than doing business with an individual because most states have rules the dealer must follow when transacting a vehicle sale. Also, these states may be able to assist you if the transaction is problematic because of these rules. Be sure to check with your state’s licensing authority (the Department of Motor Vehicles, for example) for the rules governing vehicle sales transactions. Another good source of information may be social media sites and business review sites. Look for information regarding the dealer on these sites.
If you are dealing with an individual, you should know the following information: the name of the owner; the name of the seller, if selling the vehicle for someone else; the physical location of the seller or individual; the condition of the vehicle, including any prior collision; the status of the title (subject to lien? Salvage?); and whether the vehicle is available for inspection.
Who is the owner of the vehicle?
The answer to this question is usually found on the title of the vehicle. The title document is the proof of ownership of the vehicle. In any vehicle transaction, you should ask to see the front and back of the title to look for information regarding the Vehicle Identification Number (VIN), lienholder (such as a bank or credit union), registered owner, and any title “brand” (salvage and so on).
Make sure the VIN on the title matches the number on the vehicle; if there is a lienholder on the title, make sure you know how, when, and by whom the lien will be paid. If there is a brand, consider this information in arriving at a purchase price and possible resale value.
In rare cases, the seller may be working off of an invalid or subsequently replaced title document. Use of such an invalid title is fraud. If you have any concerns about the legitimacy of the certificate of title used in the transaction, contact the state motor vehicle agency associated with the title document. The agency should be able to confirm the ongoing legitimacy of the title document.
Where is the vehicle currently located?
If the vehicle is located in another state, you may not be able to inspect the vehicle, so finding out as much information about the seller and the condition of the vehicle is very important. Also, you may need to arrange transport for the vehicle. Remember to consider insurance coverage for the vehicle during transport—Who provides the coverage?
You may want to consider the terms of the purchase payment if the vehicle is located in another state and has to be transported to you.
Where am I purchasing the vehicle?
Important questions to be answered when purchasing a vehicle over the internet are:
Where is the vehicle physically located?
Where is the “sale” of the vehicle occurring?
Where the sale occurs is very important because it may affect what rights and obligations the parties have before, during, and after the sale. Where the sale occurs may also affect what taxes are paid and who is required to pay them.
If the dealer or individual selling the vehicle is located in your state, then the sale will be considered to have occurred in your state, and the laws of your state will govern any legal action if all does not go as anticipated. However, many sales are or will be happening across the country or, in some cases, across the world. If you go into another state to take delivery of the vehicle or if you arrange for shipment of the vehicle from another state, the laws of the state where the dealer or individual resides may apply to your transaction.
Check the dealer’s website or bill of sale or contract carefully for direction as to which states laws will apply if there is a need for litigation. The document you sign, or your online agreement, may commit you to litigation in a state or country not necessarily to your liking or advantage.
If you are not sure where the sale is occurring, you may wish to find out this information before proceeding with the transaction.
Taxes. Sales and use taxes are the taxes commonly associated with the retail sale of a motor vehicle. Two factors that must be considered when determining the imposition of state taxes on the sale of a vehicle include the location of the dealership where the internet sale takes place and which state’s laws regulate the sale. Check the sales and use tax laws in your state and in the state where the vehicle is being sold or where the dealer is located.
Where, how, and when is the payment made?
Paying for a vehicle purchased over the internet may require additional steps to ensure the vehicle is delivered to you as anticipated. What are the payment options?
Although convenient, money transfers such as Western Union, MoneyGrams, and money orders offer no form of fraud protection or seller accountability. Many fraudulent sellers prefer these forms of payment because after payment is sent, there is practically no way for a buyer to get a refund or track who received the payment.
Never send your bank or checking account information to anyone. This information may provide a way for someone to take money directly from your account.
The use of a credit card may be the safest means of payment for the vehicle over the internet. Many credit cards offer a 60-day protection on each sale, and others offer even more protection for online purchases. Make sure you check first with your credit card company.
If you wish to protect your credit card number, many services (such as VISA, Discover, and American Express) offer temporary numbers to make a one-time purchases online. These temporary numbers may expire after one use or may hold limited funds. Please contact your credit card company to find out how they can protect you with online purchases.
If using a payment service (such as PayPal) protection is limited. These services allow sellers to accept credit cards, checks, and money orders online, making it convenient for buyers to keep their payment information private. Each payment service has different regulations regarding fraud protection. You may wish to contact your preferred payment service to learn what forms of protection they offer.
Finally, before you pay, MAKE SURE YOU AGREE WITH THE PURCHASE AGREEMENT AND THAT YOU UNDERSTAND THE ENTIRE DEAL BEFORE YOU SIGN. ASK QUESTIONS ABOUT EVERY ITEM IN THE AGREEMENT UNTIL YOU HAVE A CLEAR UNDERSTANDING, ESPECIALLY THOSE ITEMS THAT AFFECT THE FINAL PURCHASE PRICE.
Before you finalize the transaction, be sure to have a copy of the contract and all other documents that you and the dealer have signed. Be sure that all blanks are filled in. If you are e-signing documents, be certain that the software used complies with federal law such as DocuSign, EchoSign, or Adobe. It is helpful for the software to re-create the entire sales contract with your actual signature. INSIST ON A COPY OF ALL DOCUMENTS. Be sure your copies include the price paid, how much is still owed on the vehicle, and when your next payment is due.
Has the vehicle been inspected prior to purchase?
Always inspect the vehicle before purchasing. Whether you purchase the vehicle in person or online, always inspect the vehicle. If you are purchasing the vehicle online at a distance from the seller and are unable to inspect the vehicle yourself, you should hire a trained mechanic not employed by the seller. Be certain the inspector checks the vehicle interior and exterior to ensure that everything operates as expected and there is no existing damage to the vehicle. Make sure your inspector understands your state’s safety requirements to make sure the vehicle will pass inspection, if required, when you get it home. If the seller refuses to allow the inspection, consider passing on this sale.
In addition to a safety inspection, the vehicle is likely to be subject to a smog inspection upon entry into your state. Can the vehicle pass a smog inspection in your state? If buying the vehicle from another state, make sure the standards for that state are the same or stricter than your state’s requirements. With the VIN, you may be able to do your own research about the vehicle’s inspection history, whether it has been involved in a collision and if it has an open recall, by checking vehiclehistory.gov and nhtsa.gov/recalls.
How will you get the vehicle to your home?
Where is the vehicle located? Who pays to get the vehicle to your home—buyer or seller? Make sure you know which party is responsible for the cost before you finalize the deal. Before closing the deal, research what companies in the area where the seller is located offer transport services and the cost of the service. Another option is to travel to where the vehicle is located to pick up the vehicle. With this option, you may wish to delay closing the deal (including payment for the vehicle) until you travel to the vehicle location and close the deal at the location. Regardless of the method of delivery, make sure the vehicle is covered by your insurance or the transporter’s insurance prior to moving the vehicle.
When do you get title to the vehicle?
The title is the document issued by the state that names the owner of the vehicle. It is proof of ownership. Most states recognize certain other documents as proof of ownership of a vehicle, so if the seller shows you something other than a title claiming it will work as proof of ownership, you should check with your local vehicle licensing agency to see if it is acceptable proof before completing the purchase.
Upon full payment of the vehicle, the dealer or private seller should relinquish the vehicle title to you. Often, a dealer does not have the title in their possession, which means you should receive the title within a few weeks of the purchase. If you do not receive the title in a reasonable amount of time, contact the dealer to find out the status of the transfer.
After you complete the purchase of the vehicle, you should immediately title the vehicle in your own name in your state of residency.
What happens if something goes wrong with the purchase? Who can help?
Most used vehicles are sold “as is” with no promises or obligation by the dealer or private seller to make repairs. If you are dealing with a licensed dealer, the state that issued the license may have laws that provide you some relief for repairs. Be sure to ask the seller about the status of the manufacturer’s warranty and if any needed repairs might be covered by the warranty.
If the vehicle was purchased from an individual, you may be able to seek recourse in court depending on the language in the sales contract. It is always good to have a sales contract detailing promises the two parties agreed to in the sale. Be aware that enforcing the contract may require hiring an attorney to resolve the issues.
With regard to a licensed dealer, you may consider filing a complaint with the state agency that licensed the dealer, even if it is in another state. You should understand that it is not likely that the state agency will get your money back; they will simply sanction the licensed dealer. The Attorney General’s Office in the seller’s state may be able to help you. In addition, the Federal Trade Commission (FTC) may be able to assist you with an internet transaction when the out of state dealer has violated federal laws. As with a claim against an individual, you may wish to file suit, and the services of an attorney may be necessary. It is recommended that you first consult with an attorney where you live.
As you can see, it is very important to gather as much information as you can regarding the vehicle you are interested in purchasing, the seller of the vehicle, the location of the vehicle, the contents of the title of the vehicle, and more so that you can avoid or mitigate potential problems with the sales transaction.
