Three questions.
What’s the risk of buying a used car from a private party?
What’s the risk of buying a used car from a dealer?
Do you know?
I prefer private party
I buy vehicles from private parties for a few different reasons, here are the main ones:
- When you are able to speak to the physical owner you can ask all sorts of probing questions: how long have you owned it, how did you use the vehicle, why are you selling it, what maintenance have you had done, is there any maintenance items/repairs outstanding, did you ever tow anything with it, etc. These are all good initial questions to get a feel for how the vehicle was used and if it was well cared for. A dealer won’t know the detailed history.
- The market price for any vehicle will be cheaper from a private party than from a dealer. You can look this up on Kelley Blue Book or NADA Guides and see for yourself, on any vehicle.
- Private parties are generally more willing to negotiate on the price; therefore, you can get a deal. The average individual selling a vehicle is simply looking to get rid of a problem. This doesn’t mean the car is junk, it just means they are either trying to reduce their expenses, or get rid of an extra car they’re not using, or sell it so they can buy another car. They simply don’t want the car. They want cash instead. A dealer is in the business of making money so you know they’ve marked up the price they are asking. It’s their business.
- Sales tax is MUCH cheaper. In Illinois, for private party sales, there is a tiered tax structure based on the age of the car. For vehicles valued over $15k the tiered bracket jumps up a notch. So a 2009 Subaru Impreza would be charged $40 in sales tax if purchased from a private party. The same car, purchased from a dealer, would cost you 7% of the purchase price for taxes; so roughly $530. Yeah, it’s a big difference.
When trying to minimize your investment into a vehicle it’s hard to beat buying from a private party. I recently had a friend of a friend ask me what I thought about a car he was looking at purchasing from a dealer’s lot. It was a 2009 Subaru Impreza 2.5i with 72k miles. A quick look at KBB shows the Suggested Retail (dealer) price at $7,623 while the Private Party price is $5,721. That’s nearly a $2,000 difference! And that’s just the purchase price. If you add tax title, license and fees it would be closer to a $2,600 difference. For the same car! If you’re after peace of mind, rather than buying from a dealer, you’d be better off buying the private party car and then with the savings go out and buy yourself an extended warranty for the car to cover powertrain and bumper-to-bumper. The average cost of an extended warranty is about $1,200; you’d still be money ahead and have a better warranty than from a dealer. Here’s a good article on extended warranties.
The biggest risk in buying a used car from a private individual comes down to the honesty and integrity of the seller. If they’re dishonest, they may be hiding known issues with the car from you or not disclosing the true vehicle condition. That being said, I’ve yet to buy a vehicle from someone who was being willfully dishonest. That’s not to say that I haven’t gone to look at vehicles by people I didn’t think I could trust because there have been a few of those. If I don’t think someone is being honest or is not operating on the up and up, then I simply thank them for their time and I walk away. To me, it’s not worth the risk.