Both have their recommendations as well as disadvantages. We will lay them out for you to use when making a decision on where to go for your next car.
Knowledge of Vehicle History
You will probably get a more complete set of information about the car's repair and maintenance history from a private seller than the dealer. The dealer turns over too many vehicles to be able to give you the complete picture. The private seller, on the other hand, has intimate knowledge of the quirks and workings of a car he or she has driven daily.
To get some of the information from a dealer, you can get a Carfax or Autocheck report, but it won't be as extensive. On the other hand, there is nothing to say that a private seller will be entirely truthful about the car. They aren't bound by the same state and federal laws dealerships are.
A private seller also cannot provide a warranty, and if the individual says a warranty is still in force, you’d better call the manufacturer to check on that fact. Also, ask the manufacturer about the details of what is covered. A dealer may be able to offer a limited warranty backed by the manufacturer for a used car.
Unless you are prepared to pay cash, buying from a private seller means shopping for a loan. Since it will be for a used car, the rates you find aren’t as low as those for a new car. Some banks won’t provide a loan if the vehicle is too old or has high mileage.
Banks are also leery about financing a loan for a private seller, fearing that if there are problems with the car or the sale, the loan payments will not be sustained. The bank won’t want to be stuck with a used car. Banks are also worried about fraud and only want to work with reputable dealers.
Dealerships, on the other hand, often have financing options. Since they are confident about the condition of their used cars, they can provide a convenient way of financing if you can’t pay cash.
One more thing — private sellers don’t take trade-ins like dealerships do.
Depending on the state where you purchase the car, a sale through a private seller may not have sales tax assessed, which can save you thousands of dollars. However, in states where the sales tax is only assessed on the difference between the purchase price and your trade-in, going with a dealership may be a better financial choice.
Check your local laws to get the details for your state.
Purchase Price
Most private sellers tend to set prices by the Kelley Blue Book value of their vehicles, so you have a good idea going in about the value of the vehicle. Typically, private sellers charge less for a car than a dealership.
You also have more negotiating room with a private seller, who may be inclined to take your offer rather than haggle too much.
Dealerships generally charge more for a used vehicle, and if you want a better deal, you need to be comfortable negotiating and have an empty calendar for the rest of the day. The dealer, unlike a private seller, needs to make a profit on every car sold, leading to pushy sales pitches and games of “Let me check with my manager.”
A dealership has a reputation to maintain. Selling faulty vehicles tarnishes that reputation and decreases the traffic at that location. Therefore, if you have problems with a vehicle or the purchase or loan process, you will have an easier time getting satisfaction from a dealership.
In fact, you may be able to get a warranty from the manufacturer through a dealership, and a chance at a certified pre-owned vehicle that has been checked out and repaired. Dealers have a more extensive selection of cars. If you go with a private seller, you need to do a lot of legwork to find the vehicle you want.
A private seller, on the other, won’t care once the car is signed over to you. You have little recourse outside of legal action. The car is sold as is and you are stuck with it.
When something as complicated and expensive as a vehicle changes hands, there is a mountain of paperwork to handle. The paperwork grows exponentially when a loan is involved. The nice thing about dealerships is that they are used to managing this much paperwork and can expedite the process. In fact, they take care of getting all the documentation together. All you have to do is sign. The dealer takes care of the tax, title, and license, registration and everything.
With a private seller, you share the responsibility and work of getting the documentation together. Neither of you is well-versed in what is needed. Also, if you have a loan, you need to visit the bank as well to take care of that paperwork.
The primary differences between buying a used car from a private seller and a used car dealership are outlined above. It’s up to you to select the best way for you to purchase a vehicle, but we like to think dealerships mainly come out on top!