Paypal is great for online merchants and small private-party transactions. But when two parties need to exchange large amounts of money during a car transaction, processing fees, transaction limits, and fraud risk make PayPal an unnecessary and expensive payment choice.
We’ll introduce you to a better payment option that has the speed and convenience of PayPal without the fees, risks, and limits.
But first, let’s explore how to use PayPal if you choose to.
If the vehicle is cheaper than PayPal’s transaction limit and both parties have verified accounts, Paypal is pretty simple to use for a car transaction:
PayPal has a mobile app that makes on-the-go payments convenient for both parties.
PayPal lacks the cost efficiency, functionality, and security that buyers and sellers need in a high-dollar private party deal.
Paypal places caps on how much users can send or receive. The caps are based on a user’s account status.
Unverified accounts have a payment limit based on their account history and other metrics PayPal doesn’t disclose. Online consensus puts this number at about $10,000. Even though this is enough to cover some vehicles, most lower-mileage cars go for a lot more. To process a larger transaction, users need to get verified.
If the buyer hasn’t already verified their account, it takes 3–5 business days to complete the process—a wait the seller might not be interested in.
Once verified, the $60,000 limit will cover most mass-market vehicles, but it falls short for luxury or high-end cars. There’s no limit to how many transactions a Paypal user can make per day, so even high-end cars can be bought through multiple transactions.
A seller’s account status determines how much they can withdraw from their PayPal account. Unverified accounts can only withdraw $500 per month. Verified accounts have no withdrawal limit.
PayPal often flags large transactions as suspicious and freezes the funds for review. They can freeze money for up to 21 days if the transaction is deemed unusual or high-risk. For a $55,000 car sale, there’s a decent chance this could happen.
During this hold period:
PayPal’s fee structure for private-party transactions is a bit of a gray zone. PayPal charges the seller 2.99% to 3.49% + $0.30 per transaction for payments made under “Goods and Services.” The exact rate depends on how the buyer pays (bank account, debit card, credit card, etc.)
Here’s what that could look like for a $55,000 car transaction:
That’s almost $1,600 lost to fees. Any buyer who insists on paying with PayPal shouldn’t be surprised when the seller expects them to pony up for the fees.
Many people skirt PayPal’s high processing fees by running the transaction as “Friends and Family.” Buyers and sellers can save a lot of money this way if their bank accounts are linked to PayPal.
Using this payment type voids both parties from any legal protection PayPal might have offered against scams or fraud.
For this reason, many scammers will ask to use this payment type. Here are two common scenarios sellers need to watch out for:
Credit card companies are aggressive about retrieving lost funds, and PayPal will not intervene on the seller’s behalf if they use “Friends and Family” to skip fees and receive payment. In both scenarios, the seller could end up in a lengthy lawsuit and lose the payment.
Buyers should be aware that vehicles are excluded from PayPal’s buyer protection policy. PayPal throws out all dispute claims related to auto transactions.
Sellers put themselves at risk by accepting credit card payments through PayPal. While PayPal excluded vehicles from their dispute resolution services, unsatisfied or dishonest buyers can report the transaction as fraud to the credit card company and embroil the seller in a chargeback dispute.
Most sellers prefer to avoid PayPal because they don’t want the risk and hassle.
Beyond fraud risk, high fees, and limited transactions, PayPal suffers the same problem as other payment methods during private-party transactions: a trust problem. Both parties want to finish the deal, but both feel vulnerable to fraud and neither wants to get taken advantage of. The buyer wants some assurance that they will get the goods if they pay. The seller wants to get paid for the car before they hand it over.
A bill of sale adds trust to private-party transactions. It creates a legally binding document, signed and countersigned by both parties. Should either party try any funny business, the counterparty has a document that would prevail in a court of law. This creates a basis of security by which the buyer feels comfortable paying the seller.
A bill of sale records the terms of the transaction. Most states have official bills of sale with the following fields:
It’s fairly simple to print off two copies of the official bill of sale for the state in which the transaction occurs. For states that don’t have an official bill of sale, a generic template works just as well. Before money or car title exchange hands, the buyer and seller can fill out both copies, sign, and countersign.
But there are two edge-case vulnerabilities with printed bills of sale:
A digital bill of sale—stored in the cloud, signed and countersigned under both parties’ verified identities—overcomes these vulnerabilities. PayPal doesn’t offer this or any other tools for vehicle transactions, but DealNow does.
DealNow solves the catch-22 of trust with a digital bill of sale and provides a payment alternative to PayPal that is instant, secure, and convenient. Our convenient mobile app makes high-dollar car transactions a breeze. Here’s how DealNow outperforms PayPal:
DealNow combines PayPal’s convenience with robust features specifically programmed for safe, efficient car transactions. It’s your convenient solution to the unique challenges of private-party vehicle sales.
You can safely accept payment for a car using PayPal, but you should verify the buyer’s identity and avoid accepting a credit card payment to prevent getting scammed.
While PayPal’s payment process is safe enough, DealNow guides you through the entire transaction with buyer verification, FDIC-insured bank accounts, and a digital bill of sale that protects you from a disgruntled buyer.
The safest payment method when selling a vehicle is DealNow. Unlike checks and physical cash, DealNow facilitates instant, verified transfers of large amounts of money directly between buyer and seller.
DealNow secures transactions by:
With DealNow, you get the immediacy of physical cash with bank-level security. Funds are held in FDIC-insured accounts with easy offboarding to your regular bank.
PayPal’s buyer protection does not cover vehicle purchases. Car buyers should always receive an independent mechanical evaluation of the vehicle to confirm its condition before purchase.
DealNow helps prevent scams by verifying both parties’ identities and facilitating the transaction within a secure environment, reducing the risk of sending funds to an unintended recipient.
DealNow is the easiest way to close your own vehicle deal, anytime. It’s the safe and simple way to avoid fraud, sign documents, and instantly transact, all in one app.
