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Buying a car

Buying a car privately vs buying from a dealer

14 October 2020

It’s an age-old argument — do you get the best used car deal buying from a dealer or from a private seller? As you’d expect, there are strong arguments for and against both options.

Buying a car from a dealer

The dealer can make it easier

Let’s face it, buying a car is a stressful situation. For some of us, it will be one of the largest financial transactions we make. There are plenty of pitfalls for the unwary or inexperienced — and when it comes to buying a car, some of us can be both.

Buying through a dealer removes some of the pressure because it’s something they do daily. The dealer knows how to handle the nitty gritty of a car sale and understands the paperwork, including transfer of title and registration.

Warranties and guarantees

An important factor to consider is that a dealer will offer a warranty. However, be aware that there are compulsory warranties and extended warranties at additional cost.

Reputable dealers should have thoroughly inspected used cars they offer for sale, and, if necessary, carried out repairs, but don’t rely on this. Carry out your own inspection, and if you’re not skilled call in an expert. Motoring associations in all states can conduct inspections of any car you’re considering — and if it saves you buying a potential lemon, or even worse, a potential death trap, it’s money well spent.

Buying a used car the same make as the dealer sells new can also add peace of mind. Some new car dealers carry out official inspections and even offer higher warranty protection on “approved” used cars

It comes at a cost

Dealers have to cover their margins and ensure they make a profit, so buying through a dealer is almost always more expensive than buying privately. On top of this, most dealers will accept a trade-in as part payment towards the purchase of car, but will generally offer less than you might achieve by selling it privately.

Some car salespeople may be pushy. Don’t accept this sort of behaviour and if you encounter it, speak to the Sales Manager or go to another dealership. Keep in mind though, that most sales staff are working on commission, so they may seem a little too overzealous to make a sale. The best and most successful salespeople are trained to find out what your real needs are and help you make a decision that’s in your best interests.

Buying a used car privately

Haggling for the best price

One of the strongest arguments for buying from a private seller is that you, the buyer, can haggle more strongly for the best possible price. Most private sellers have an inflated opinion of the value of the car they’re selling, gained from scanning ads for similar cars’ “asking” price rather than the final “selling” price. So, keep in mind, you have plenty of room to negotiate and you can always walk away. If the seller has an urgent need to sell, your position is even stronger.

Estimate how much you can borrow

On the other hand, haggling with a dealer is more difficult. Dealers know the value of what they are selling, and they deal with car buyers every day, so they know every trick in the book to achieve the best possible price.

No warranties or guarantees

While the initial purchase price may be better on a used car than you could negotiate with a dealer for a similar car, you don’t have the same protection. Sellers aren’t obliged to disclose potential problems (even if they’re aware of them). Private sales aren’t covered by any warranty and if any problems arise, they’ll be your responsibility to repair. With a private sale, an independent inspection is even more important than if buying through a dealer.

To mitigate these risks, it’s a good idea to tick these boxes:

  • Arrange for a mechanic to inspect the car and provide you with a written report.
  • Conduct a test drive at various speeds.
  • Be realistic about how suitable the car is, and its condition in relation to similar cars on the market.
  • Ask to see a certificate of roadworthiness and, if possible, a service history.
  • Check with the appropriate body in your state to ensure there’s no money still owed on the car and that it hasn’t been written off.
  • Get a detailed written receipt that includes the seller’s full details, your details, selling pricing and VIN (vehicle identification number).

It’s more work for you

When you buy a car from a private seller, you and the seller have to handle all the details yourselves. Few, if any, private sellers will accept a trade-in, so if you want to sell your current car, you’ll have to sell it privately. And as mentioned earlier, completing the paperwork, transferring title and registration and paying the various fees will be up to you and the seller.

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Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Information Document before making any decisions about whether to acquire a product. We do not accept any legal responsibility for any loss incurred as a result of reliance upon this information – please make your own enquiries.

Author Bio:

This article is written by Paul Murrell.

Paul Murrell has always had a deep interest in all things automotive. After a successful career in advertising, creating campaigns in Australia and overseas for many companies including Holden, Mercedes-Benz, Mazda, Toyota, Volkswagen, Land Rover and Renault, he relocated to the Adelaide Hills and began writing car reviews, advice and opinion pieces for specialist motoring magazines (Survivor Car Australia, Australian Classic Car, Man & Machine, Classic & Sportscar UK, Unique Cars), lifestyle magazines (SA Life, Highlife, Tasmanian Life) and websites (Practical Motoring).

The information is intended to be of a general nature only. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.

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