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Dealer vs private sale: Which car buying option is best?
Unsure whether to buy from a dealer or private seller? We explain the pros, cons and the best ways to tackle your next car purchase.
It’s a question almost as old as the motor car itself: Should you buy a used car from a private seller or a dealer?
There are pros and cons for either option, and they are weighted differently for certain buyers – car enthusiasts, for example, or fleet operators – but the focus here is on motorists who want an affordable mass-market car for the usual reasons: safety, comfort and low running costs.
More: Research and compare new and used cars, SUVs, utes and vans on sale today in Australia
Should I buy from a car dealer in Australia? Are they reliable?
Some Australian car buyers still hold to the stereotype that used-car dealers are more interested in making a quick sale than selling a safe, reliable vehicle – a perception that can make people wary of stepping into a showroom or forecourt.
Buyers may be reluctant for that reason to do business with dealers – known formally as licensed motor car traders.
Usually, however, the stereotype doesn’t hold true. The buyer is protected by Australian Consumer Law when purchasing from a dealer. And between the ACCC and other regulatory watchdogs, modern dealers cannot afford to be caught doing the wrong thing.
Warranty protection and trust can deliver peace of mind
A key advantage of buying from a dealer is the statutory warranty that comes with the car. This provides protection and peace of mind for many buyers during the first three months or 5000km in Victoria.
But a word of warning: while the warranty can provide more confidence, three months is not long. That’s often why dealers select quality used cars to sell – saving themselves from any potential warranty claims or negative ‘word of mouth’ publicity for the dealership. All the same, an inspection by the RACV before purchasing is recommended.
Other reasons to buy from a dealer may include the potential for ongoing servicing and maintenance in the same place, if that dealership also has a service centre for that vehicle brand.
How can the buyer check that the dealer is to be trusted?
Google reviews are a useful guide, but ratings can sometimes be unreliable or misinterpreted, boosted by reviews that aren’t entirely genuine or influenced by frustrated customers who’ve had a negative experience.
More: Are there lemon laws for new and used cars in Australia?
Car prices can be higher at dealers in Australia
High pricing is a singular problem with buying a car through a dealer.
The dealer’s ‘floor plan’ – a rolling line of credit to buy stock – must be factored into the retail price when a car sells. If the car has been on the lot for a long time, it owes the dealership more in interest. Other dealer overheads include everything from staff salaries, power and phones to advertising and council rates.
The higher the dealer’s overheads, the higher the transaction price – the final negotiated price between the buyer and salesperson.
For those reasons, the dealer wants to turn over every car as soon as possible. Most buyers, on the other hand, will want to take their time to think about what’s on offer and assess their options, undertaking the necessary research and comparison of different vehicles.
In general, buying a car as soon as you walk into a dealer’s showroom for the first time is not recommended.
More: The best used cars, SUVs and utes in Australia under $20,000
Pros and cons of buying a car from a dealer
| Pros | |
|---|---|
|
Warranty cover |
Higher prices for same specification and mileage of vehicle |
|
Quality used cars |
Pressure to buy on the day |
|
Car’s history on display in a sheet fastened to a side window |
More affordable finance and insurance options available elsewhere |
|
Service facilities |
|
|
Can be a one-stop shop for finance and insurance |
Is it better to buy a car from a private seller in Australia?
Buyers tend to trust private owners selling their car, but not every seller is deserving of that trust.
Say an owner conceals from the buyer that the car’s cold-air injector or some other mechanical part needs replacing – at a potential cost of hundreds of dollars. That might be why the engine has been warmed up to normal operating temperature when the buyer arrives to take it for a test drive.
There are many such ways in which the buyer might be misled by a seller who’s not fully transparent.
An important measure of trustworthiness is the way the vehicle is advertised for sale. If the car is claimed to have been ‘serviced regularly’, check the logbook to make sure that’s the case. And take the time to make a thorough inspection of the car, inside and out. Is there minor panel damage that the seller has neglected to mention or photograph for the advertisement, for example?
There is one particular type of private seller you can usually rely on – a close family member or trusted friend. A car that has been ‘in the family’ for several years is likely a known quantity. But don’t be beguiled, not even by a relative.
Sellers can really lay on the charm if a sale hangs in the balance. It’s very important to buy a car on its own merits, not the seller’s personality. And having the car checked by RACV before committing to the purchase is perhaps even more important with a privately owned car than one sold by a dealer.
More: How to buy a used car with confidence using our checklist.
Advantages of buying a car privately
Unlike the dealership, a private seller doesn’t have to pay sales commission and all the other costs, so there can be a lot more wriggle room to haggle for a good price if everything checks out and the car looks like a worthwhile investment.
When buying a car privately, buyers can dig deeper into the car’s back story. Whether it’s the registration due soon or a new instrument binnacle fitted several years earlier (with an odometer reading that doesn’t match the logbook), such nuggets of information will have some bearing on the transaction price.
More: The best used cars, SUVs and utes in Australia under $10,000.
Pros and cons of buying a car from a private seller
| Pros | |
|---|---|
|
Potentially lower selling price |
No warranty protection |
|
Known vehicle history if buying from a family member |
Seller is not bound by Australian Consumer Law |
|
One-on-one (non-corporate) buying experience |
A leap into the unknown if the seller is not completely honest |
|
Possible inconvenience – travelling further to inspect vehicle |
Remain flexible about who you buy a car from – private seller or dealer
There is often a delicate balancing act in buying a used car, influenced by a range of factors such as the advertised price, your budget, your ability to access finance and the condition of the car itself compared to others you might have seen and similar models from different brands.
If the car is relatively new and defects are unlikely to present within the three-month period of warranty coverage, or if the car remains covered by the factory warranty issued when it was new, you can be more confident purchasing from a private seller.
Overall, taking the time to research and compare vehicles with tools such as RACV Car Match will help you in the quest to find the right car, regardless of who sells it.
Car buying help from RACV
R.A.C.V. Finance Limited ABN 82 004 292 291 Australian Credit Licence No. 391488. RACV Finance is subject to RACV lending criteria. Conditions, fees and charges apply.
Advice given in this article is general in nature and is not intended to influence readers’ decisions about financial products. You should always seek your own professional advice that takes into account your own personal circumstances before making financial decisions.
