When the time comes for me to buy a used car, the two most readily available options are buying from a dealer and buying from a private party seller.
Both have their pros and cons — as I’ll show later — but I generally seek out cars being sold by private parties because they are usually quite a bit cheaper than those sold by dealerships. With the right preparation and a little bit of work, you can make private party sales work for you.
And yet, despite the higher prices, dealerships are still going strong. This is no accident, of course, as private party dealings offer no shortage of pitfalls compared to dealer shopping. Some people swear by their local dealership and wouldn’t consider looking anywhere else.
I’ll present both options and let you decide.
Buying a Used Car from a Dealership
The terms dealership and used car salesman often carry negative connotation. But I think buying from a (good) dealership can offer a few advantages to buying from private parties. The most important ones can primarily be categorized into those related to risk and convenience.
Less Risk?
First and foremost, buying at a dealership can be less risky. Of course, used car shopping will always come with some risk of ending up with a lemon, but going through a reputable dealership can alleviate some of that risk.
For one, the Federal Trade Commission requires dealers to post a Buyer’s Guide on every car they sell, which must tell you whether the dealer is offering a warranty, and that all deals should come in writing.
Just as importantly, the FTC also provides an avenue for filing complaints should you become unsatisfied and suggests contacting your state Attorney General’s office or local consumer protection agency to see if there are outstanding complaints from others about the dealership.
Even without these government bodies, in the age of Yelp and other review websites, dealerships depend on the strength of their reputations to continue making sales into the future.
By contrast, there are relatively few ways to punish a private party seller who knowingly misled you with a bad car.
More Convenience?
Dealerships may have many cars available so you can take your time when browsing. Even if you’ve already picked out which make and model you’re looking at, they may have multiple trim levels and years, as well as competitors who offer the same vehicle. On top of that, a dealer will likely take your trade-in, whereas a private party seller is likely to only be selling the one he listed and has no use for your old car.
Dealerships are a one-stop shop for all the aspects of car-buying besides the car and the cash. Dealerships usually include a finance department and offer warranties as well. Not only that, they’ve got staff experienced at filling out and submitting the necessary paperwork, including smog inspections required by law. If you buy from a private party, you’re doing all that out on your own.
Finally, dealerships usually have trained, certified service staff on site to give your car an inspection and make necessary repairs. In some cases, they may refurbish them to the point that they pass a manufacturer certification process that they’re allowed to carry the designation, “Certified pre-owned.” In large part, this is just marketing talk but they also typically include an extended warranty and access to dealer repairs, similar to what you’d get from buying a new car. A private seller is probably not a mechanic.
Buying a Used Car from a Private Seller
So far, it may look like I’ve given a pretty solid argument for buying from a dealership, but for me and many similarly minded people, the cost issue outweighs the other factors I’ve mentioned. Not only do private parties often list a lower price up front, they also offer more room for negotiating since they’re not trying to impress a manager. Furthermore, the private party you’re buying from might be just as much of a novice as you when it comes to negotiating, whereas this is what the sales team at a dealership does all day, every day.
Here are some ways to close the gap when it comes to risk and convenience and take advantage of these lower costs.
Risk
Because the private party seller may not know the actual condition his car is in — or would prefer not to tell you — it’s on you to alleviate that risk.
I break down the steps I take into what I call a pre-screen, a self-inspection, and a full inspection.
Pre-screen: Upon coming across an interesting listing — using Craigslist or otherwise — I ask the seller for the VIN so that I can run a Carfax report. Yes, Carfax is a pay service and yes, I understand that it’s possible that not all accidents find their way onto the Carfax report, but it’s a great starting point. You’d be surprised at how many sellers I’ve met that don’t know what trim level their car is, so running the Carfax will also give you an idea of what sort of engine the car will come with and which options it came standard from the factory with.
In the pre-screening phase, you should also use Google to search for recalls initiated by the manufacturer as well as common issues faced by owners of that model and model year. You should ask the seller if he has addressed these issues.
While using the internet, see if you can find an owner’s manual for the car too and print out the pages related to checking fluids. This will come in handy when you’re checking out the engine during the self-inspection.
Self-inspection: If possible, ask that it not have been started recently. Weather-wise, I like to meet sellers on clear sunny days so that everyone is in a good mood and I can see nicks, scratches, and discolorations, that clouds or the dark of night might hide. Obviously, scratches shouldn’t prevent you from buying a vehicle, but you should keep them — and the other imperfections you’ll look for — in mind to use later when it’s time to negotiate price. Also, keep a lookout for whole panels that are different colors from the rest of the car as these may indicate that the car has been in an accident.
While you’re outside of the car, get down and look too at the tires. They should be evenly worn. Odd wear patterns could be an indication of suspension issues. Here’s a handy guide from the Allstate blog that tell you what each of these mean. And since you’re crawling around anyway, peek under the car for rust — especially if you’re north of the sunbelt.
If the engine is cold and the car is on level ground, this would be a good time to check under the hood, using the parts of the owners manual that you printed out. Pull the dipstick to see whether the oil is too low or too high. Again, only if the engine is cold, remove the radiator cap and check to make sure that the coolant isn’t milky — a sign that the gasket may have failed (refer to the manual pages you printed out to know what color it should be). If it’s an automatic, pull the transmission dipstick and make sure it doesn’t smell burnt. Grab the timing belts and ask when they had last been replaced.
Ask to see the trunk and if there’s a spare tire underneath the carpet, remove that too, then sniff around. If there’s obvious water damage or mildew, it could be a sign the car’s seen water damage.
Then, get in. Take a good long whiff. That’s the smell you’ll be living with.
Stick the key in the ignition, but don’t start it, and check to ensure that the check engine light doesn’t come on. Now start it up. Does it struggle for a bit before it gets going? This is another time when it’s very helpful to get a cold car because you want to know how it’ll start when it’s fresh first thing in the morning.
Now start driving.
After a few seconds of listening with the radio on for alternator whine, politely ask that the seller turn the radio, heater, and air conditioner be turned off; you don’t want anything to cover up road noise coming in or rattles in the car. That tiny rattle coming from the seat belt that doesn’t matter much to you now is going to drive you crazy when you’ve lived with it for some months. More importantly, noises that are out of the ordinary could be a sign of engine trouble.
Accelerate and brake a little harder than you normally would to get a better sense of the limits you’ll be taking the car to. Keep driving and turn the air conditioner all the way on to make sure it’s blowing cold air and to make sure it doesn’t smell terrible. Then, turn the heater all the way on to make sure it’s blowing hot air. Now, take the biggest whiff you can — bad smells in the upholstery might have been covered up with air fresheners; they won’t be covered in the heater vents! Again, you will be living with this smell.
If this all checks out and you’re pretty happy, you might think you’re ready to hand over all your cash and drive away in the new car.
Don’t.
Mechanic inspection: Before you seal the deal, ask to take the car to a trusted mechanic. You’ll probably pay around $100 for a full inspection, but that amount could be well worth it to avoid a lemon. Mechanics deal with cars all day and have all kinds of diagnostic equipment, so they can find issues you wouldn’t be able to. If they do find an issue, ask for written estimates on cost to fix it. You’ll be able to use these as leverage when you negotiate.
Convenience
In the age of the internet, many of the conveniences that you could historically only get from dealerships are available at the click of a button.
Craigslist usually offers plenty of the particular model of car you’re looking for within a reasonable distance. You can get multiple competing offers within a few days from banks and credit unions for financing — some of which might beat the dealership’s offer. Of course, it’s always best to just pay with cash…
Your State’s Department of Motor Vehicles (DMV) website should have all the forms readily available to buy a new car. You and the seller need to sign the title and some states require a bill of sale. These are easy things to do.
Finally, if you don’t already know a trusted mechanic, you can usually find a few nearby using Yelp. Just call them and ask if they will look at the car. I’ve been told that some even do it for free.
All in all, by not being afraid to get your hands dirty and having a little patience, you can often get a great deal on a used car from a private seller.
What do think? Do you buy from a private seller or dealer? Share with a comment below!
Author Bio: Mario blogs about paying off and living with student loans, all while chasing financial independence and the next big adventure. Won’t you follow him at the Debt Blag?
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