If you’ve found yourself on the hunt for used car, chances are you’re quickly learning that the best deals can typically be found when buying from a private seller. Dealerships typically charge higher prices, which reflect some of the benefits they offer: a reconditioned vehicle (in most cases with at least some sort of short-term warranty), the willingness and ability to take your old vehicle in trade, assistance with financing, and other add-ons. For some buyers, these differences are important and will impact where they shop and how they negotiate, whereas others are simply looking for the lowest price. Regardless, all used-car buyers should prepare themselves to negotiate by researching market values and securing their own financing ahead of time. Here are some important points to consider when it’s time to talk numbers.
Private Sellers Are Motivated to Get Rid of the Car
Unless you’re talking about the owner of a unique or classic vehicle, your average private seller isn’t looking to make a huge profit when selling a car. Generally, they want nothing more than to unload the vehicle for as much money and as little hassle as possible. When presented with a reasonable offer, a private seller will likely be willing to negotiate, while a dealer may draw out the process in an attempt to get you to pay top dollar.
Negotiator’s tip: Be prepared to justify your offer by researching comparable vehicles for sale in your area.
Private Sellers Want Cash Buyers
As noted above, most private sellers want a simple and easy sale. That means a cash transaction that can take place in their driveway—you pay, sign a bill of sale (and possibly the title, depending on the age of the vehicle), and take the car away. They’re not interested in taking your trade-in, nor are they willing to help you with or wait for you to arrange financing. The seller walks away with a fistful of greenbacks.
If you’re concerned about bringing that amount of cash with you when purchasing the car, you can suggest that the seller use CarGurus’ listing service to handle the transaction. We offer a verified, secure online transaction with $75,000 worth of protection. It’s the same as a cash purchase, but you don’t need to bring a suitcase full of twenties when you buy the car.
Negotiator’s tip: Get a better deal by making an on-the-spot offer to buy the vehicle.
Dealerships Want to Make a Profit
Dealerships get their used inventory from a variety of sources (trade-ins, auctions, other dealerships, etc.) and have to pay not only for the vehicles but often also for the transportation and reconditioning of those vehicles. Any amount of money greater than that investment is profit, and like most businesses, dealerships aim to make as much as they can. If a vehicle sits on the lot for an extended period of time, the dealership may be inclined to take a loss on the sale price. But it will make every effort to compensate for that low price by undervaluing your trade-in, arranging your financing with one of its preferred lenders, or selling you an extra warranty.
Negotiator’s tip: Before starting any negotiation, speak with your bank or credit union to determine your finance rate. This will allow you to negotiate the price of the car without paying a higher-than-necessary interest rate when financing.
Dealerships Negotiate on Multiple Parts of the Sale
With a private sale, the only thing you’re negotiating is the sale price. As far as financial transactions go, it’s as basic as it gets. On the other end of the spectrum is a vehicle purchase from a car dealership. Here, the negotiation includes not only the sale price, but also finance rates, trade-in values, and the multitude of extras the dealership wants you to buy (extended warranties, service contracts, fabric protection, gap insurance, and so on). To avoid any confusion and potentially overpaying for any of these, address them individually instead of grouping them together when negotiating a monthly payment.
Negotiator’s tip: Checking a vehicle’s history report highlights not only accidents and past service, but also when the vehicle was originally sold. Use that date to determine how much—if any—of the original vehicle warranty remains to avoid buying what could potentially be unnecessary extra warranty coverage.
The Bottom Line
There are advantages and disadvantages to buying from dealerships and from private sellers. The former has likely reconditioned the vehicle, can take your trade-in and provide financing options, and, in many cases, handle all the paperwork associated with title transfer and state registration. Those benefits should not be overlooked. On the other hand, a private sale is quick and easy, and will often make a smaller dent in your savings account. Determine which option best suits your needs, and have fun shopping for your next new-to-you ride.