How to avoid payment pain when buying a second-hand car

Buying a quality low-kilometre used car can deliver substantial savings over a new one, but there’s a degree of risk no matter whether it’s purchased from a licensed dealer, auction house or private vendor.

Tips on buying a second-hand car

Buying from a dealer provides the security of a statutory three-month/5000km warranty (if applicable) and guarantee of title. Auctions are riskier because you can’t test drive the car and it’s more difficult to have a vehicle inspected prior to bidding, but you can often come away with a bargain if you’re vehicle savvy.

Buying privately might have the best financial outcome if you’re a good negotiator and know what you’re looking at, but it can also put you at the mercy of dodgy sellers and scammers. It’s a case of ‘buyer beware’, and you’ll need to consider your options carefully. The usual caveats apply: research prices for that particular year model and specification level, thoroughly investigate the vehicle’s condition, and find out if there’s finance owing on it. For a small fee, the NRMA offers a car history report that includes this information plus additional checks to see if the vehicle has been stolen, written off or rebirthed.

After that’s all sorted, it’s plain sailing, right? Well, not quite. If you’re planning to drive off in your new wheels straight away there are payment and insurance issues to consider. These can take time to sort out, especially on weekends. Buying on a weekday when banking institutions are open can save time and, if you’re shopping on a Saturday or Sunday, it may be better to offer the seller a small holding deposit until Monday.

How to pay for a second-hand car

A bank cheque might be considered old school and it comes at a small transactional cost, but it’s still regarded as secure. It’s even better if both parties can complete the transaction at a bricks-and-mortar branch, as it minimises the risk of being scammed or the deal going pear-shaped. Sellers should never consider a personal cheque from an unknown person.

Paying in cash on the spot is the quickest option and it can sometimes give a buyer leverage in negotiations. If you don’t have a wad of pineapples in a biscuit tin, though, withdrawing large sums from a bank often requires regional approval and it can take up to two days for funds to be available at a branch.

Electronic funds transfers (EFTs) are a popular option, although they can also take one or two days to clear, with sellers naturally reluctant to hand over keys before the transaction is finalised. I’ve heard of sellers agreeing to provide the signed notice of disposal section of the vehicle’s rego papers in return for a proof of transfer document from the buyer’s bank. While the seller retains the vehicle until funds are cleared, buyers can transfer the rego into their name. However, it’s important to remember the certificate of registration doesn’t prove vehicle ownership, only the person who takes responsibility for it.

Whatever your choice, it’s better to bring up payment options before you get too deep into negotiations with the seller if you want to avoid any angst once you’ve agreed on a price.