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Selling a car: what payment method to accept

You can use bank transfers, cash in hand, cheque or escrow to receive payment when selling your car. Here’s our advice on how to securely transfer funds.

Nimisha Jain

Additional words by: Nimisha Jain

Last updated on 16 August 2022 | 0 min read

Once you’ve negotiated and agreed on a price, the final step when selling your car is receiving payment. So, what is the best way to get paid for your car?
There are a few options - you could take cash in hand when the buyer collects the car, use a bank transfer for a quick and immediate payment, accept a cheque or use an escrow that could take care of receiving money for you. Here are the pros and cons of each method of receiving payment for your car:

1. Cash

If you’re willing to take a cash payment, consider arranging for this to take place at a bank. The staff there can count out the notes and guarantee they’re genuine. You’ll also be able to pay the money in immediately.
If you don’t hand it over at the bank, make sure you count the money and be careful walking around with large sums of cash. One of the drawbacks of accepting cash as payment is that if the money turns out to be counterfeit, it can be difficult to track down the buyer if they’ve already driven away with your car. So, when receiving cash, ask for the money to be handed to you during business hours, receive the money inside a bank where the bank can immediately check the notes for forgeries and deposit the funds in your account right then. Related: Tips on selling a used car safely

2. Immediate bank transfer

Buyers paying for a car through online bank transfers is one of the better ways to get paid. Bank transfers can be done quickly via the ‘Faster Payments’ or CHAPS (Clearance House Automated Payment System).
Just be aware you’ll have to provide the buyer with your bank details, including your name, a six-digit sort code and your account number. Sometimes, the buyer might not be keen to wait for the several days a bank transfer can take, but a genuine buyer should be prepared to do so. There can, however, be limitations to bank transfers, for example: • CHAPS may charge a fee for use • If using ‘Faster Payments’ services, note that some banks have a limit on how much you can send • You may also be able to arrange payment using a card reader and online banking. • If you do arrange a bank transfer, keep your car in your possession until the money has been transferred.

3. Cheque or banker’s draft

If you decide to accept a cheque or banker’s draft, you should safeguard yourself by getting proof of the buyer’s name and address in advance, just in case you need to chase them up.
Before you hand over the car, you should confirm with your bank that the funds have cleared, which is not the same as the funds appearing in your account. There’s also the option of a banker’s draft, which is guaranteed by a bank. Be aware these can also be faked. It’s a good idea to go to the bank with the seller where the funds can be drawn. To safeguard yourself, don’t release your vehicle until you have confirmation that the cheque is genuine and has been paid by the buyer’s bank. Check with your bank to ensure the draft has been ‘given value’ rather than merely ‘cleared’. A banker’s draft doesn’t clear immediately, so again, the seller will probably want to wait for the funds to clear before letting the buyer drive away. Be particularly wary of buyers who view your vehicle after the banks have closed and produce a bank draft already made out for the full asking price.

4. Escrow

An escrow service is a trusted third-party that acts as a mediator between the car buyer and seller by holding and distributing money.
The benefit of using an escrow is that a trusted source handles sending and receiving money for your car. The escrow will check the funds sent by the buyer to protect the car seller from fraud and money order scams. You can also set the terms for the transaction, for example, some escrow services allow the buyer to set an inspection period where the buyer can check the car matches what they paid for. If the car does not meet what they were promised, the buyer can ‘reject’ the car and the escrow will return the money to the buyer. Escrows, however, will charge you a fee for using their services which usually varies, depending upon the value of the vehicle being sold. They might charge a percentage of the car’s value or a set fee for their services. This is especially useful if you’re buying your car online. Either the buyer or the seller can bear the cost of the service, or you both could split the cost between yourselves. If you use an escrow to send and receive money, make sure the company is legitimate by checking with the Financial Conduct Authority, who keep a list of unauthorised firms and individuals to avoid. Some services are entirely above board; however, others can be fraudulent services which appear legitimate but are run by fake ‘sellers’ who target unwitting buyers. If you are unsure about the escrow service, look for signs that indicate that it might be fake, such as - false licence numbers, logos and copyright details, as well as a mobile phone number disguised as a foreign landline. On the other hand, there are also ways to spot a legitimate escrow service: • A legitimate service will never ask you to wire the funds directly to another party • Look for sites which have a padlock icon at the bottom of your screen and ‘https://’ at the start of the website address – this means the site is secure. Avoid ones that don't. • If you’re suspicious, type the company’s name into a search engine. A legitimate escrow service will have several results listed, whereas a fake escrow site will have very few • Finally, remember that Auto Trader will never recommend escrow, payment services or payment protection as a means to send or receive funds for a vehicle.
No matter whether you're buying or selling, a smooth payment is the best way to end a successful transaction. Here, we explain how to take the risk out of making or receiving a payment using the main options available.

If you’re selling your car…

When you’re selling a vehicle, it’s important you know how to spot the signs of a possible fraud. No matter how trustworthy the buyer you're dealing with appears, have a look at the following rules: • Never send money abroad • Never pay a large deposit • Don’t hand over your vehicle until you’re satisfied the funds are in your account. Check with your bank that you can withdraw funds safely on the cheque • Remember your bank will not honour fraudulent drafts or drafts that cannot be cleared through lack of funds • Don’t be pressured into releasing your vehicle. A genuine buyer will not mind waiting until the draft has cleared Remember: If you’re taking a cheque, never let the buyer have your vehicle until the funds have appeared in your bank account, as the cheque could be forged, cancelled or stolen. Bank drafts, contrary to common belief, are not as good as cash, so treat them just as you would a personal cheque. Related: What to do once you’ve sold your car

If you’re a buyer…

• If you’re using an escrow service, check that the company is legitimate. A typical example of fraud is when the ‘seller’ places a fake advert with an unusually low price to grab the buyer’s attention. When the buyer enquires about the vehicle, they’re sent a standard reply, promising to waiver the shipping costs and suggesting payment is made via a particular escrow service. After the money is sent, the seller becomes impossible to contact and untraceable. • Whichever method you choose to pay for the car, never send money for a vehicle you haven't seen. • Finally, no matter how the money changes hands, it’s important to ensure that the seller provides the buyer with a receipt and keeps a copy for themselves. Related: Tips on buying a used car safely

What to do if you think you’re a victim of fraud

If you think you’ve been targeted by a fraudster, contact Auto Trader immediately by emailing or calling 0330 303 9001.