When Buying a Used Car You Must Use an Escrow Service

by Car Negotiation Coach

If you’re buying a used car from a local dealership you probably do not have to worry about payment fraud.  The dealership has a physical location, plenty of cars in inventory, and a lot to lose by stealing your money.  But when buying a used car from an unknown private party or dealership online, you have to be very careful.  Cars cost thousands of dollars and that attracts a lot of scammers and unscrupulous criminals.  Fraud in car sales is very common and you need to protect yourself when buying a car from a stranger.  This is where an escrow service can help you.

What is a car escrow service?

Escrowing is when you send your money to a neutral 3rd party that monitors a purchase to make sure it’s legitimate and secure.  An escrow service authenticates that money is exchanged in return for a vehicle and that neither party walks away empty handed.  When buying or selling a car, I strongly suggest using a secure and licensed escrow service like Escrow.com which is the only escrow company recommended by eBay Motors.

Escrow when buying a used car

How does escrow work for buying and selling used cars?

  1. First, both the buyer and seller register with the escrow company and agree to the terms of the transaction.  This includes the sales price, a description of the car, and shipping information if applicable.
  2. The buyer then submits a payment to the escrow service.
  3. After the payment has been verified, the escrow service lets the seller know to ship or deliver the car.
  4. The buyer receives the car, verifies receipt with the escrow service, and accepts or rejects the car.
  5. Upon buyer acceptance, the escrow service releases the money to the seller.

The key safety measure is that the funds are not released to the seller until the vehicle has been both received AND the condition approved by you

What does an escrow service cost?

Escrow.com charges the following for their vehicle escrow service:

For Vehicle amount

Escrow Fee


3.25% ($25.00 minimum)


$162.50 + 0.26% of amount over $5000

over $25,000


Don’t let the seller recommend their own escrow service.  There are just too many scammers out there on the Internet.  If you read tips on Craigslist or eBay Motors, they will also tell you to avoid unknown escrow services, Western Union and other wiring services.  Again, Escrow.com is the only escrow company recommended by eBay Motors.

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{ 7 comments… read them below or add one }

Finance Pro

With the amount of used car transactions that take place online these days, I find it hard to imagine investing in such a large purchase without taking the opportunity of an escrow service. Unfortunately, it is necessary to work out an agreement with escrow.com to insure that if the used vehicle is not as the seller initially described, then you won’t be stuck in the position of working it out yourself or potentially losing a substantial amount of money. Its safety measures like these that allow us to protect our finances through secure advising, management, and transaction services online.

Car Negotiation Coach

I agree, there’s no reason not to reduce your risk for such a big purchase.

Financial Samurai

I donno man. I almost got scammed buying online on CL asking to put money in a fake escrow company. Buyer beware!

Car Negotiation Coach

I agree, there are many fake escrows companies out there….that’s why I would only use escrow.com

Barb Friedberg

This is quite informative. Although we usually buy new and keep forever, it’s good to know about. For future reference, our daughter may be buying a used car, and the buyer of our car(s) may be interested in this type of service.Thanks Geoff, this info is quite helpful.


I can see this as being a useful tool when selling a car. It may be just enough to sway a close decision by a wavering buyer. We have to sell our two vehicles next year, and I will keep this in mind.

Car Negotiation Coach

Excellent point Hunter. As a seller, escrow can be used a selling tool to put the buyer at ease.

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