Buying a new car is a big decision. There’s a lot to think about and a lot of decisions, and one of the most challenging is whether you should buy the car from a dealership i.e. your local Ford or Toyota dealer, a third party such as Carvana or Carmax, or an individual who is looking to transfer ownership of their vehicle to you directly. This can be a complicated question but let's take a look at what's involved.
Are You Buying New Or Used?
Ultimately, the first question that you need to identify is are you looking to buy a new car or a used car? If you are looking to buy a new car, there is only one option - buying it directly from a new car dealership connected to a manufacture.
However, if you are looking to buy a used vehicle, you'll find that all three of the options we presented above are great ways to purchase a new vehicle, depending on what you are looking for.
Why You Should Buy A Used Car From a Manufacturers Dealership
As we stated above, buying a car from a manufacturer's dealership is the only way to buy a new car that contains all of the OEM warrantees and other benefits. However, these same dealerships are almost always selling used cars too. Sometimes these used cars are for the same brands that they sell new and other times it is a other makes and models. For instance, when you visit a Toyota dealer, the organization is specifically associated with the manufacturer and can provide you with aftermarket care and expertise that only the manufacturer can provide. However, while a new car comes with all sorts of nice benefits (and not the least of which is it just feels great buying a car nobody else has owned before!), a certified pre-owned vehicle is a great option too.
For instance, you can buy a 2021 Camry XSE for about $31,000 on the new side but you can find a similar 2018 Camry XSE for only $27,000 "Certified Pre-Owned". Certified pre-owned vehicles will have been inspected by a manufacturer-trained staff and come with a warrantee that is similar to what you'd find if you bought it new. In fact, in many ways, a 2-3 year old vehicle coming off of a lease may actually be superior to a new car direct from the factory since any "quirks" will have been worked out and fixed by then. Plus, you are saving thousands of dollars and you can generally negotiate the price.
Why You Should Buy Your Car From a Used Car Company
Certified Pre-Owned vehicles are a great option but used car sellers such as Carvana and Carmax are able to offer a similar level of confidence that the vehicle you are buying has been inspected. For instance, CarMax Certified means that there is no major damage or salvage history and they have a 125+ point inspection as well as the car being reconditioned. Generally speaking, the condition of a used car here will be similar or perhaps better than what you will find from a dealership. Plus, these large used car companies tend to have excellent websites and customer service to make the buying process simple and straight forward without having to worry about negotiating.
On the other hand, visiting an independent used car dealer's lot might be a completely different ballgame.
If you buy from a dealer, remember:
- Used car dealers usually have their vehicles independently checked, and will be members of a trade association. This means they must follow a code of practice.
- Used car dealers are bound by law to make sure that what they sell you is of fair quality, fit for purpose, legal to drive, and matches its description.
Why Buying Your Car Directly From A Person Might Be The Best Option
As with any things in life, the more advanced option is generally going to be the best one ... but only if you are an advanced user. Buying a car directly from another person is a great option if you know what you are doing, know what to look for, have time to shop, and want to negotiate. For instance, you aren't going to find a finance office to help walk you through the process of getting a loan, you'll have to do that on your own. Likewise, you are going to have to get the vehicle inspected on your own and chances are there will be some rough edges and maintenance items that you will want to fix on your own.
However, you will be able to negotiate with the price and this could result in a savings of hundreds or thousands of dollars less than you might pay a used car company or dealership.
When you buy a used car from a private seller, you don’t have much option if something does go wrong with the car or it is not what you expected. Be careful and make sure you:
- Check all the paperwork. If the seller can’t provide proper documentation, the car is registered in a different name, the documents have mistakes or details that don’t match, or it lacks any important paperwork, walk away.
- Check that the mileage consistent with the age and look of the car.
- Check the mileage on the car against test certificates and service records.
- Check that the paint finish is even. Look out for panels that look different. Differences suggest major repairs.
- Look in the boot and under the bonnet. Are there any signs of rust or odd welding?
- Check the tires.
- Ask if the spare tire, jack, and vehicle toolkit are included.
- Make sure the seatbelts are working.
- Check any fault lights that appear on the dashboard against the manual.
- Test the washers and wipers.
- Test all the lights.
An even better choice is to ask to take the vehicle to a mechanic and have it fully inspected before making the purchase.
While it should be expected that a used car purchased from a private seller will have items that need to be addressed, you should have someone able to identify any red flags as well as provide you with an estimate on repair costs for any items that you will want to take care of. Even basic items can provide you with an opportunity for negotiation. For example, if you are buying a used Camry from a private seller but you discover that brakes are almost worn out, it needs new tires, and the muffler is rusted, that could represent $1,000 in repair costs that you'll need to do in the next few weeks. This can be an opportunity to further reduce the purchase price.
This is the biggest difference between buying a used car from a dealer vs a private seller. The dealer will have already taken care of all these items and is charging you for it. However, a smart buyer can usually find a great deal and fix it themselves. This can save hundreds of dollars.