Used Car Buying Tips: Should You Buy From a Private Seller or a Car Dealer?

We bought a car!!!

We decided to purchase a budget subcompact car when we found out we would be expecting our first baby. It was a begrudging choice (I’m not a car person at all). It was elevated by the fact that we will be moving and buying another house in a secluded cul-de-sac near exceptional schools. Very safe and suitable for properly raising kids.

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Living in our neighborhood with literally 3 bustling highways right next to us was great for my Airbnb + getting to places without cars but not for the next phase of our life. I’ll miss the $300 dropped on gas and car insurance every month. The highway pollution, noise, and nutjob drivers will not be missed when we get our little baby to our new home.

Our car is an inexpensive, adorable little Honda. I’ve heard my share of cheap car nightmares so we went for a solid, boring little car. Even though our little sub-compact car is “inexpensive” (considering a Tesla is $80k)…cars are still probably one of the most expensive purchases out there.

A single automobile can cost more than the amount of student debt accumulated in a 4-year university. On the bright side, thanks to the Internet – we can buy, sell, and advertise cars online with ease.

The Rise Of Online Car Selling

The Internet made online shopping possible.  Of course, car shopping also joined the revolution, with more people finding their dream cars in places like Cars Direct, Auto List, Car Gurus, and Hemmings etc. Private sellers usually use social media sites or online listing sites such as Craigslist and Facebook Marketplace. There are even car sellers that offer free car delivery nationwide (like Carvana). Traditional car dealerships seem like it was becoming out of date.

In addition to variety, online car selling eliminates the need to go lot by lot to look for potential cars. According to Autotrader, car buyers usually spent 59% of their car-buying time searching for car candidates online. JD Power’s 2016 study revealed that 22% of new-vehicle shoppers usually use social media sites to research. Most people who buy their cars online are usually looking for second-hand cars because of the financial benefits.

Advantages Of Buying Used Cars

One of the advantages of buying a used car is the lower price tag. Cars are one of the most easily depreciated properties because of moving parts and natural wear. In 2017, the average price of a new car is $36,113. On the other hand, the average price of a used car is $19,400, which means you can almost save half of the price by buying a used car.

Consumer Reports suggests that when buying a used car, look for three-year-old cars so you can get recent modern features for half the price of a new one. Our little Fit is 3 years old, used. Buying a used car, you can save money on the state sales tax too.

These days, cars are built to last, so even a car manufactured half a decade ago can still be reliable when properly maintained. Even manufacturers offer extended long-term car warranties, especially for high mileage vehicles. Extended warranty providers also sell their products at a very competitive price.

Private Seller VS Car Dealerships

Before you find your car, it is a good thing to know what budgeted numbers you’re working with and what features you’ll need. Factors such as gas mileage, exterior, security, safety features, and brand reliability play into it.

In our instance, we found 2 very comparable cars – one from a dealership and one from a private seller with an almost $750 price difference (private was cheaper). So our dilemma is now…should we buy from a reputable car dealership or from a private seller?

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Reasons To Buy Second-Hand Cars From Private Sellers

Private car sellers usually use indie, free means of advertising their cars. Craigslist is among the most used platform if a private owner wants to sell his or her car.

1. Save More Money

Buying a used car from a private seller is a good option for people who are knowledgeable in cars, as well as people under a tight budget. One of the advantages here is the fact that there is no “dealer fees”, which can cost up to $1,000 just because of dealership fees.  In addition, since private sellers don’t sell their cars for profit, they will abstain from selling you up upgrades. Buying and paying in full from a private seller is even better if you can afford it.

2. Private Sellers Are Flexible (= Chance For Negotiation)

Dealerships will usually have a “markup” in their products. The reason for this is because dealerships are businesses, which means that there should be a profit in every transaction to keep their business afloat. Whereas private sellers will usually sell their cars to get rid of it, and sometimes, as soon as possible for quick cash flow.

There are a variety of reasons why private sellers want to get rid of their cars, and you might get a good bargain out of it. One such example is when they need fast cash or planning to upgrade for a better car.

3. Meeting The Previous Owner

Last but not least is the chance to meet the actual owner. Everyone knows the fewer number of owners, typically also means less risk of a bad car. Having a single owner car history is a plus for sellers. Although dealerships have car histories, you never actually meet who the previous owner is. Meeting the original owner and understanding their lifestyle can tell you a lot of things – like how well it was handled and how the owner took care of it.

Things To Look Out For When Buying From Private Sellers

1. Compare Prices of Cars Online

This is really easy to do and there’s no reason not to check Kelly Blue Book. There are free available price checking services online such as KBB or True Car. If the car needs repairs or minor things here and there, you need to let the seller shoulder the damage or ask for a price reduction (which can be awkward.)

2. Seller’s Identity & Documentation

The seller’s identity is as important as the CarFax car documentation. You can verify if the car documentations are valid by checking government-issued IDs of their owners (e.g. seller’s name and address in the vehicle registration form).

3. Use Reliable & Traceable Payment Options

Don’t use cash to pay for your second-hand purchase. Instead, always use a traceable payment portal so you can file a dispute if ever there is a problem after the purchase. Avoid using wire transfers such as Western Union or MoneyGram.

4. Use Anti-Theft Car Tools Before Closing

Even if you pay money for it, a stolen car is still a stolen car, and chances are, you won’t have any good claim on it. One way to check if the car is stolen is to perform a VIN check. Be wary if the VIN is tampered or scratched. You can then check the VIN through the VINCheck database from the National Insurance Crime Bureau (NICB). 

5. You Must Inspect With a Trusted Mechanic

Last but not least, inspect the car thoroughly and don’t do it yourself for God’s sakes (unless you’re a mechanic yourself.) Request a test drive and permission to bring a mechanic. Cost to inspect a vehicle from a mechanic can cost $200 to $300 dollars. I know that sounds like a lot of money but your car is likely costing into the tens of thousands. Bring an expert and you’ll thank yourself down the road. This is to ensure that there are no hidden defects that the seller is trying to hide (or they themselves don’t even know about.) 

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Reasons To Buy Used From Car Dealerships

There are generally three main types of dealerships: the dealers that specialize in a specific brand (like a Honda or Audi), dealerships like Enterprise (selling retired rental fleets), and family own/totally independent small-time car dealerships. The general rule when I was doing research and talking among friends was to get a used car from single brand-authorized dealers since they specialize.

1. Cars Are Typically Certified

Dealership mechanics usually test their goods before letting making the product available for sale, especially in used items. There’s also a chance that the dealership already does the repair on their inventories which they do to raise the price of their products. There is also a guarantee that the car is not stolen.

Dealers get dibs on cars coming off car leases plus a good variety of trade-in from other car buyers. Dealers must thoroughly inspect all vehicles and repair parts before putting them up for sale. They will sometimes offer perks like free oil changes or free car wash for a year etc. You are not going to have any of these things buying from a private seller.

2. Available Warranties

Dealerships usually offer warranties and certain day no-question asked return policies. Dealerships are useful for people who don’t know a lot about cars. Once something goes wrong, he or she can just call and the dealership will do the rest within reason, especially if it’s an oversight on their end. They have a business and brand reputation to keep up unlike private sellers who have no real skin in the game.

3. Financing Options 

A lot of private sellers usually require a full payment because of the need for cash or other reasons. One-time payment also means less hassle for private sellers, but not for the buyer. Dealerships usually provide financing options to people who currently have tight budgets.

Things To Look Out For When Buying From Car Dealers

1. Watch Out for Money Traps

Because dealers will profit in order to stay afloat the market, most of sales representatives will try to sell you warranties and upgrades that you might not need (a.k.a. extras). Before being swayed by convincing arguments, you should ask yourself first if you really need the extra feature.

Dealerships will also prefer financing over a buyer with straight forward cash. That is because when a customer comes in and uses the dealer’s in-house financing, they actually receive a commission for closing the loan AND the whole profit from the vehicle sale. If you are financing, there are misc. document and loan origination fees so watch out.

2. Don’t Be Afraid to Say “Not Today” 

Dealerships have a certain…unsavory reputation due to the sales pressure they apply. Practice saying “no” to the purchases that you’re unsure of and bring someone who is experienced in car buying to come with you.

3. Scope Out Multiple Dealerships

Last but not least, don’t settle into just one dealership. Don’t be afraid to walk away. Make the time and effort to look for another dealer’s offers (super easy with the Internet). If you mention that you already made a visit from another dealer, you’ll come off as a savvier shopper.

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What We Ended Up Doing

I was very tempted by Carvana initially. The online-only dealership that delivers you a car and streamlines the entire process online. But it bothered me a bit that we were going to buy our first ever car sight unseen. The Carvana price was pretty good but I’m not much of a risk-taker.

Buying from a private seller was also risky because my husband and I are timid people. Craigslist just seemed sketchy for big purchases like this. Our options widdled down to nearby dealerships and we pay slightly more for it in the end for that return policy and condition guarantee.

We also paid more for a slightly newer car assembled in Japan. There’s a slight premium for cars coming out of Japanese plants vs plants in Mexico. I’m not conclusive on the validity of this of course, but the Honda fanatic forums were very pro-Japan in terms of assembly and quality.

TL;DR – For our growing family we chose a budget value, super safe, low-maintenance, no-frill, boring, reliable little car from a reputable dealership to get us from point A to B. The end 🙂

Do you think we made the right choice going with a dealer? Do you have any experience buying or selling with a private seller?