Buying a car privately used to be a breeze of a process. You could just bring along a few hundred bucks and fork them over if you thought the vehicle was up to your standards. These days, though, the average cost of a new vehicle has shot up to over $30,000 and the average used car sits around $20,000. In the world of luxury vehicles and trucks, the numbers are even higher. Using escrow services to handle the transaction derisks the process and makes it safer for both buyers and sellers and debunks the myth that you can't transact safely and easily in the private market.
What is an escrow company?
An escrow company helps facilitate the escrow process, which is a financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction. With the funds from the buyer going initially to the trusted third party, the seller can then provide the product to the buyer free of worry that the money won’t be sent or will disappear later.
Escrow has long been used in home buying as a means for securing funds and titles, but is more frequently being applied to vehicle transactions, vintage watches, and more as well. The key for a reliable escrow service is to ensure that it is fully licensed and bonded, with lots of experience in the industry.
That’s why we at Topmarq chose Escrow.com. They are the industry leading escrow system that has names like GoDaddy and Shopify as partners. As the world’s leading provider of online escrow services, Escrow.com has more than 1.5 million customers and has transacted over $4.5 billion in payments. We built Topmarq to be the safest online private marketplace and so using the best escrow service was the only option for us.
Why should you use an escrow service?
Remember the rising prices of used vehicles above? Well, the last thing most people want to do is walk around in drug-dealer style with $30,000 cash in a bag while they inspect a vehicle they’d like to purchase. As such, almost all high dollar vehicle transactions moved to other forms of payment - checks, cashiers checks, ACH, and wire transfers - because they seem more modern and safe. Sadly, creative cons have manufactured ways to best even these methods.
The bad news - normal payments aren’t bulletproof
Without going into too much detail, the problem we now see is that scammers have become increasingly effective against these traditional types of payments. They come up with very convincing stories for why certain conditions have required a sequence of payments and then ultimately don’t send you the vehicle and disappear with your cash. According to the FBI, they received 26,967 claims worth $54B from Nov 2014 to Dec 2017 for fraudulent car sales.
The good news is there is a relatively easy way to thwart the scammers: an escrow company
One of the biggest things all scammers rely on is that you will be acting alone with your own money. That’s why it’s very rare for a dealership to get scammed even though they buy countless vehicles from the private market every day of the year. Using an escrow service gives you trusted and knowledgeable third party help to ensure every step of the process goes smoothly.
The great thing about this option is that just the act of using it tends to ward off any potentially nefarious actors. They know it will be nearly impossible for them to get around the escrow process and therefore move onto other options.
The process that is used on Topmarq has been designed to effectively remove any chance of financial fraud occurring during the transaction.
How the escrow process works on Topmarq
Below is the general sequence of steps that are involved when buying or selling a vehicle through the Topmarq marketplace. This escrow process is based on Escrow.com’s service and used by thousands of companies.
- When a buyer registers to bid or a seller lists their vehicle, an Escrow.com account is created for them to verify their identity through. This helps speed up the transaction process once an offer has been accepted.
- An Escrow.com transaction is initiated when the seller agrees to an offer that has been submitted by the buyer. The buyer will be redirected to Escrow.com during check out to complete the process.
- The Buyer will be directed to deposit the vehicle payment funds to Escrow.com via wire transfer. Click here to learn more about Escrow payment options.
- Once the buyer’s funds are secured, we notify the seller to transfer the vehicle to the buyer.
- When the buyer receives the vehicle, they will be prompted to accept or reject the vehicle within 48 hours. If the buyer does not act in the 48 hours, acceptance is assumed. For more information about the Inspection Period click here.
- Once the vehicle has been accepted by the buyer, the funds are released to the seller's bank account. If the buyer rejects the vehicle, it is the buyer’s responsibility to cover the cost of shipping (if any) the vehicle back to the seller.
The benefits of this process may not be immediately clear, but the result is that both parties are much more protected than they otherwise would be. An average person who writes a cashiers check only to not get the title signed over has very little recourse to get their money back. With this escrow process, however, the escrow company simply returns the money to the buyer should the seller not provide the vehicle as agreed.
Even with a bill of sale, it's difficult to track people down once money has changed hands. By keeping it with a third party while the transaction is occuring, you ensure that each step is followed as required.
In many cases, it is up to the parties to decide whether they think an escrow service is a prudent move. For us at Topmarq, however, the added security and reliability for each and every transaction is what allows us to make buyers and sellers feel comfortable in the private market again, which is undoubtedly worth it.