Car Buying Guide: Buying Through a Dealership or Private Seller

When you’re looking to get a car, you have two places you can search: you can either buy through a dealership or through a private seller. There are benefits and disadvantages to either option. In a few minutes, you’ll learn the difference and find out which is right for you.

What is a Dealership?

For reference, a dealership is a business that sells cars for a living. They’re called “used car lots” or car dealerships. They have a large parking lot filled with different used cars.

The way they make money is by buying a used car for cheap, then selling it for more money. When you go to a dealership as a buyer, you’ll be talking to a car salesperson during the process. They get a commission if you make a deal with them.

What is a Private Seller?

A private seller is someone who is looking to sell their own personal car. They might also be selling it on behalf of a friend or family member.

At any rate, they own the car or have a connection to the owner. They might be selling a car because they’re getting a new one, they never use it, or they don’t want the car anymore. Their motivation is a little more mysterious than a car dealership.

When you buy from a private seller, all the money goes right to the seller (minus whatever taxes or fees are associated with buying and selling a car).

What’s the Difference Between a Dealership and a Private Seller?

There are a number of differences between these two places to buy a car. Let’s review them.

The Cost of the Car

As a buyer, the cost is probably the biggest difference that you’ll care about. When you buy a car from a dealership, it will cost you a lot more money.

Again, this goes back to the fact that a dealership needs to make money to keep its doors open. The main way they do this is by overcharging the sale of each car.

Hidden Fees

Another reason why dealerships are more expensive is that they’ll include hidden fees that aren’t explained. This money goes to the dealership for a variety of different reasons, and it’s the profit for their sale.

In a private sale, you know that every penny is going to the seller.

Reliability

Here’s another topic that differentiates a dealership from a private seller – how reliable the source is. Used car salespeople have a track record of tricking people into buying a junky car for too much money. They use a lot of different sales tactics to make you pay more than you want and get less than you need.

At the same time, a private seller can be just as unreliable. With a private seller, it’s a little easier to put them through the wringer and see who they really are. Since used car salespeople sell cars for a living, they’re better at lying about certain details and leaving information out.

Likelihood That the Car is Stolen

You have to beware of certain car deals. People steal cars and then sell them to unsuspecting buyers.

Dealerships don’t have the same problem with selling you a stolen car because they have to go through a more strict process. On top of that, car dealerships are sometimes audited to see if any cars in their inventory are stolen.

You need to be cautious when you buy from a private seller. Make sure they aren’t selling you a stolen car because you’ll be on the hook in the end. You won’t get your money back and you’ll be questioned by the police if you buy a stolen car – even if you think it’s legitimate.

Where the Money Goes

We mentioned it a minute ago, but the money goes to different places depending on where you get the car. In a dealership, the money gets passed around to a lot of people in the office. Everybody working at the dealership ultimately gets a piece of the money you pay.

In a private sale, the money goes right to the seller and that’s that.

Financing

Although a dealership will charge more, they might also offer you financing directly through the dealership. If you didn’t know, financing is the ability to pay off a car loan in monthly installments rather than having all the cash on hand. This is a great method since cars can cost thousands or tens of thousands of dollars.

With a private seller, you’ll have to get a loan yourself through a lender or bank in order to afford the car.

This isn’t an option if you have the cash to buy the car outright, though.

Services

Another benefit to going with a dealership is the services that they can offer. They might provide some type of warranty and offer in-house mechanical services for your car. After buying a car from a dealership, they’ll be prone to offering discounts on their services.

With a private seller, they can’t offer you anything besides a car for cash. Consider if the extra luxuries are worth the extra cash at a dealership.

Availability of Cars

Dealerships are often filled with different cars. This gives you a great opportunity to test drive different cars and see which one is right for you.

Some dealerships are specific to certain makes, but others just have random cars on their lot. If you’re on the fence, then you can walk around their lot for a while.

Private sellers can realistically only be used if you know exactly what you’re looking for. This might mean an exact make and model, or a precise price range that you need to stick within.

A private seller often only has one car for sale, so you already know what you’re walking into.

Accountability

Finally, there’s a level of accountability that goes into running a dealership. If they screw you over with a deal, you can blast them on social media and get the local news outlets involved. Bad press is a car dealership’s worst nightmare.

With a private seller, there’s nothing you can do unless the action was so heinous that law officials have to get involved.

Accountability can be used to leverage more honesty out of a dealership. It does nothing to improve your position with a private seller.

Ability to Negotiate

With a dealership, there’s not a lot of room for negotiation on your end. Unless you catch them on a bad day for the dealership, the sticker price won’t budge too much. If it budges a lot, then that’s a fake sticker price, and the real price is hidden in the Finance Department.

Private sellers are used to buyers negotiating and haggling with them on the price. If you want to save a few hundred bucks, then you might be able to talk them down on their price.

Conclusion

The differences between a dealership and a private seller go on and on. Which option is right for you? Review these differences to figure out if you want to go with a dealership or private seller for your next car purchase.