Should You Buy a Car from a Private Seller or a Dealership?

When considering where you want to buy your car from, you will be faced with the question, "Do you want a private seller or a dealership?" This question is a loaded one and the answer depends entirely on what you are looking for. There are pros and cons to each seller, and it will be up to you to decide which one aligns best with your values.

How well do they know vehicle history?

Both are relatively equal on vehicle history due to Carfax reports. Any history of accidents, maintenance, repairs, and more are noted on this report. However, private owners are more likely to better understand how their car runs, and any issues that may be there. Whether or not they choose to disclose that information with you is up to them.

Which is better for financing options?

If you're financing a new car, that will be easier than financing a used one because with used cars interest rates tend to be higher, and some banks won't even finance vehicles past a certain age or mileage limit. Some banks also won't finance cars through private sellers either because banks are concerned that the private seller will not be 100% accurate and will not adequately describe a car's condition that may not be noted on the CARFAX report. Banks face the risk that the buyer will walk away from the loan if the car has serious problems. Banks also worry that the private seller isn't reputable, so you typically find that banks primarily deal with reputable dealers. In regards on what that means to you, all that means is that if you can afford to pay for the car yourself then a private seller might be a viable option, however if you want financing through a bank it would be easier to find a bank that will finance through a dealership. However, if you want to look at options of banks that finance through private sellers you will need to look into private-party auto loans.

Are there any tax benefits to either?

This all depends on where you live. In some states, taxes have the potential to be a benefit for both private sellers and car dealerships. In some states like New Hampshire, Oregon, Delaware, Montana and Alaska there is no sales tax which means that whether you buy from a dealership or private seller you are saving money regardless. Another potential tax advantage for all states except California, Hawaii, Maryland, Kentucky, Michigan and Virginia is that sales tax will only be assessed on the difference between your trade-in and the purchase price of a new car. In that case, buying from a dealership would be your best bet on savings overall. When it comes to tax benefits, it is best to check your local laws.

Who will have the best purchase price?

More likely than not, the best purchase price would be from a private seller opposed to a dealership. The reason for this is because dealerships need to make a profit on each vehicle they sell while private sellers don't have the same concern. A private seller's concern is getting rid of a vehicle at a better price than trade in value at a dealership, this also means that private sellers are more flexible with negotiating prices with potential buyers.

Likelihood of being scammed?

Now the main concern when purchasing a car is making sure you don't get ripped off. One key component to keep into consideration when choosing between a private seller and a dealership is that the dealership has a reputation to uphold if they want to continue their business. If a dealership sells a car that is less than adequate, then the dealer risks an angry buyer that can come after them and ruin their reputation through reviews and complaints. Private sellers are more likely to avoid problems that arise out of a sale while dealerships are likely to go out of their way to solve problems.

Overall

All of these questions should be kept in mind when choosing between a car dealership and a private seller. You need to gauge what you're looking for and this will allow you to make the best decision for you during the car buying process. Be aware of scams and make sure to read everything before signing. Best of luck!