Is the premium markup of a used car dealer really worth more than a private seller’s? Compare the pros and cons of both.

Car shoppers who are looking for the best deals on used cars have a lot to think about before driving off into the sunset with their new vehicle. Private sales and dealer lot sales are two different types of transactions. Knowing how they differ will help used car buyers with a budget make an informed decision about where they will go to make their next purchase.

Kelley Blue Book Classifications

Vehicle pricing resources like the one found on Kelley Blue Book’s web site suggest a number of values based on the car’s make/model, year and condition. Users enter information about the car and the system proffers a number of prices. These prices are “dealer’s suggested price” and “private party value.” The two prices differ because of how used dealerships generally work.

Used Car Dealer

One of the prime reasons that dealer values are higher is because of the process figured into selling a car. A used car dealer typically pays for detailed inspections of incoming stock, and even refurbishes previously enjoyed cars with interior upgrades and new parts before putting them on the lot. Customers of reputable companies know they are getting cars that have gone through the lot technician’s scrutiny. They get no such treatment from a private party seller, where someone with a title is just seeking to get rid of their vehicle for a profit.

A used car dealer also has the power, and obligation in some cases, to add warranties, which makes the sale more valuable.

Financing

Auto financing may factor into a car’s overall value at a dealership. Financing is increasingly popular in today’s auto market. It gives buyers the ability to walk away with products they otherwise couldn’t afford. Not everyone has $10,000 on hand to make a purchase with. As a result, dealerships have become effective brokers between shoppers and banks or other financial firms. Some actually offer their own financing, but according to some experts, this is less common than the seller acting as a third-party solicitor for a loan.

Dealer Markup

Some customers have issues with financing their vehicle through a third-party. In some cases this is called a dealer markup or dealer reserve, while some call it “padding the deal.” Keep in mind that markups give buyers leverage during price negotiations. The lot has already secured the money, the buyer wants the car, and the seller is going to do just about anything to close the deal, sans losing money. Bidding slightly lower than the financed price is a good place to start. For example, if you’re approved for $7,000, start your buying price at $5 or $6k. Additionally, you might consider bringing along a bidding specialist if you know of one.

How To Get The Car You Want, Cheap

Sometimes people opt for private sellers simply because “the price is right.” Sure, you might find the car you want listed slightly lower than expected, but private sellers don’t have to worry about things like reputation, maintaining favorable public perceptions, and trust. Buying private can be a real gamble.

Think about the aforementioned details before purchasing your next vehicle.

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