Is it safe to accept PayPal when selling a car?

When a buyer pays with PayPal, they can choose to pay with either a bank account or a credit card. Both of these payment methods can be reversed for different reasons. If they pay with a bank account, PayPal initiates an ACH debit from the buyer's bank account. The most common way for an ACH debit to be reversed is if the account being debited has insufficient funds. In other words, the buyer doesn't actually have enough money in their account. The problem is that the payment will appear to be successful at first, but then will be reversed hours or as many as 3 days later.

If the buyer pays with a credit card, they can file a dispute with their credit card company. They can claim they never received the vehicle or that it wasn't as described and the bank will file a claim to PayPal. PayPal won't have any evidence otherwise and will most likely accept defeat, refunding the payment. Then they'll go after the seller to recover the funds.

PayPal's seller user agreement states:

When you receive a payment, you are liable to PayPal for the full amount of the payment sent to you plus any fees if the payment is later invalidated or reversed for any reason.

If you've already moved funds out of PayPal, they'll debit them back. If that doesn't work, they'll "engage in collection efforts to recover the amount due from you" which will likely impact your credit score. That means if the buyer never had the funds to begin with or they win a dispute with their credit card company, the seller would have to give the money back to PayPal.

Unlike most personal property, transferring ownership of a vehicle is more complicated than just taking it home and putting it in your garage. Ownership has to be transferred on the vehicle's title and the buyer needs to be able to register the vehicle in their name. A number of issues can arise with the title and since PayPal has no visibility into this process, it's simply too risky for them to offer protection to buyers, even with a 2.9% fee.

For example, the vehicle could have an outstanding lien, be owned by someone other than or in addition to the person selling it, or the title might not be the most recently issued one. All of these things could prevent the buyer from registering the vehicle and obtaining a title in their name. Verifying the seller's legal ownership and ensuring that the title is transferred correctly in all 50 states is a problem that PayPal just isn't designed to solve.

KeySavvy is a peer-to-peer payment service designed specifically for private party vehicle transactions. Using identity verification, the latest payment technology, and the capabilities of a licensed dealer, we're able to guarantee sellers get paid and buyers get a clear title. It's simple and fast, too – most transactions complete within a day.

Learn more about how KeySavvy works.