When it comes to buying a car, you're never going to hear an ad on the radio or see one on TV encouraging you to buy third-party used cars. You're never going to hear about available financing. In fact, dealerships make it sound like they're really the only reliable option out there.
Here are some myths about dealerships that may influence your decision. At the end of this post, I'll discuss the advantages that DO come with buying from a dealership. What you decide is up to you...in a later post I'll talk about the lessons I've learned from my own experiences and research when it comes to dealing with dealers if you want to go that route.
Myth #1: If you don't have the money to pay cash for a car, you have to go through a dealer
Fact: Banks will loan you money for (many) third-party purchases
Many banks apparently will not give you a loan if the car is older than four-five years, but there are internet companies available that are more flexible and can give you lower interest rates (sometimes their interest rates for private party cars are even cheaper than for used cars!)
Myth #2: Big dealerships can give you a better deal than small dealerships.
Fact: It COMPLETELY depends on the dealerships.
Large dealerships can place big bulk orders, so they can get discounts. They also see a lot of leased cars returning to them. So there's that. However, there are a lot of reasons why little dealerships can win out. First of all, large dealerships are more likely to run promotions that add to the trade-in value of the cars coming in. Since they're taking those cars in at an inflated rate, they're incentivized to resell them at a higher rate, too. Secondly, it's not actually cost-effective for large dealerships to spend a lot of time looking for great car deals at auctions and other locations. For smaller dealerships, though, that's their lifeline. So what you end up with is smaller dealers buying their cars for less, and then trying to sell them for lower than their conglomerate counterparts. Here's an example: when I was car shopping, I found one local dealer who had a 2007 Honda Civic listed at 10,000 as the starting price, with about 75k miles on it. When we went from that dealer to the larger company, they tried to sell us the same model, year, and trim, with about 5k MORE miles, for 14,000. We told him we'd only consider it if they could drop the price below 10,000, and after about half an hour of negotiation, they flat-out told us it was impossible and that they had paid more than that for the car in the first place.
Myth #3: Shopping at a dealership saves you time
Fact: Nope.
On our one day of dealership shopping, my husband and I spend ten hours at five different dealerships (drive time from one to the next is included here.) Any time we tried to get a straight answer on the cost of a car, it took another half hour of negotiating at least, with our most frustrating conversation taking almost a full hour. Contrast that with the time I spent texting third-party sellers, where I was able to negotiate prices at home or at the store or anywhere else, and didn't go to the seller unless I was pretty convinced that I was interested enough in their car to purchase it. No WAY was that more time-consuming that being at a dealer. The only time when I'd say it is efficient to go to the dealer is to do your preliminary test-driving. It's convenient to have an assortment of models available under one roof.
Now, on to the reasons why you might still want to buy from a dealer.
First of all, there are lemon laws in many states, which basically make it illegal for a dealer to sell you a crap car. These laws do NOT apply to private party sellers. So, in other words, you buy from a private party at your own risk. With that in mind, you also have to remember that you will pay more buying from a dealer than from a private party. For instance, the model of car I purchased has an estimated Kelley Blue Book value of $7545 as a private party car in excellent condition, or a retail value (not certified pre-owned) of $9370. That's a difference of $1825. So unless repairs cost more than that, I'm coming out on top.
Also, many cars that are less than five to seven years old are still going to have leases on them, which can be intimidating because it means that you're going to be giving the seller money, but won't be walking away with the title in hand. We'll discuss this in more detail later, but that is an extra bit of security that comes from buying from a dealer.
In summary, consider the peace of mind and mechanical assurances that come from buying at a dealership as an optional surcharge that you can get with your car. If it's worth the cost to you, then go for it. If you're like me and are too poor to spend that kind of money, go with a private party seller.
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