Buying a car from a dealership comes from many benefits: a wide range of cars to choose from, financing options, as well as warranties and certified pre-owned (CPO) cars. While you may be tempted to opt to buy from a private seller, the dealership may be a better choice. Keep reading to understand why.
Benefits of Buying from a Dealership
Certified Pre-Owned Vehicles and Warranties
CPO cars are used cars that have been certified by the manufacturer after undergoing a rigorous inspection and reconditioning process. Having passed these tests, they are given extended warranties and a manufacturer certification ensuring the car meets their quality standards. CPO cars have to meet specific standards after undergoing checks of the interior, exterior and mechanical components. They usually have strict age and mileage requirements. All of this combined generally gives the buyer more confidence in the car than a regular used car, although they are typically more expensive.
The warranties that come with CPOs are what make them most attractive. They often come with an extended powertrain warranty covering major components like the engine, transmission and drivetrain for a certain time or mileage. This is often up to 7 years of 100,000 miles. They sometimes also come with bumper-to-bumper warranties, which cover a wide range of systems or parts, usually for a year after the CPO purchase. In addition, CPO programs usually come with other perks like roadside assistance.
Conversely, regular cars usually come without a warranty, and if they do, it is usually limited, as it is the tail end of the warranty the car had when it was bought as new.
Financing Options and Incentives
Buying a used car from a dealership provides several options on how to finance your car. Dealerships often provide incentives to make the car more affordable, which you wouldn’t get from a private seller.
If you choose to opt for dealership financing, you’ll be obtaining a loan directly from the dealership, usually with the help of a third-party lender. Dealership financing is often a convenient option as in many cases, you will be offered on-the-spot approval, meaning you can complete the entire car purchase process in one visit. There may also be special promotions available, such as 0% interest, deferred payments or low interest on loans for qualified buyers. There may even be flexible loan terms, such as long and short repayment periods. It’s important to note, however, that the interest rate you are offered will vary depending on both your credit score and the dealership’s agreements with lenders.
If you opt for a bank loan instead, you’ll be able to get pre-approval before going to the dealership. This is useful as you’ll have a clearer idea of what you can afford. Moreover, if you have a good credit score, bank loans often have lower interest rates compared to dealership financing, meaning lower overall payments. They usually also come with fixed monthly payments and interest rates, making budgeting easier. However, bank loans often offer less flexibility and the approval process may be more time-consuming, requiring you to provide additional documentation and undergo more detailed credit checks.
You may also benefit from other incentives from the manufacturer to make buying a used car more affordable. Manufacturers may offer cash rebates on used cars, which can directly reduce the car’s price, lowering the amount you need to finance. There may also be seasonal discounts, loyalty programs and trade-in offers that you can make use of.
Trade-In Opportunities
Trading in your current car helps you both get rid of your current vehicle and reduce the price of your next one. Dealerships offer instant appraisal without the need to advertise or negotiate so you can get immediate credit towards your next purchase. You may even benefit from tax savings, as in some states, you will only pay the sales tax on the difference between the price of the car you're purchasing and the trade-in value.
Here are a few steps to getting the best value for your trade-in car:
- Clean: Make sure your car is clean as first impressions count and can make a huge difference. Detail your car if necessary.
- Maintenance: Make sure any minor repairs are taken care of as this could increase your car’s value.
- Research: Check your car’s value using online tools like Kelly Blue Book and Edmunds so you know that you are getting a good trade-in deal.
- Documents: Have your maintenance records, title and registration documents with you as this will speed up the process. Evidence of good maintenance history could also get you a better deal.
Consumer Protection and Legal Safeguards
There are several legal protections and safeguards in place to ensure you are treated fairly and protected against fraud, defective cars or deceptive sales practices.
There are some federal regulations that dealerships must comply with:
- TILA: The Truth in Lending Act (TILA) ensures that dealerships must disclose the terms of any financing clearly and accurately. This includes the total cost of the loan, monthly payments and interest rate.
- FTC: The Federal Trade Commission (FTC) Used Car Rule enforces the “Buyer’s Guide” requirement, meaning dealerships must provide a Buyer’s Guide for every used car they sell. This must include information about the car’s condition, warranties and how to resolve any issues.
- Lemon Law: Dealerships must disclose if a car has been subject to significant repairs or a lemon law buyback.
In addition, dealerships must also comply with state-specific laws. These include lemon laws, emissions and safety standards. Dealerships must also be licensed by the state they operate and comply with business practices in that state.
Lemon Laws, Return Policies, and Fraud Protection
Dealerships must disclose whether a car has been subject to a lemon law. A lemon law protects buyers from cars that have had significant defects or that cannot be repaired after multiple attempts. If a car is deemed a lemon, the consumer can usually get a replacement car or a refund and the dealership is usually required to buy it back or replace it. However, lemon laws vary by state and each state offers different protections.
You should also make a note as to whether a dealership has a return policy or not as they are not always available on used cars. When they are there, dealerships may only offer a limited return period of several days. Some states have specific regulations as to return policies for car purchase, so you should check on the legislation in your area.
In addition, you should be wary of any misrepresentations. If information is relayed falsely or not conveyed to you at all, you may have the right to legal recourse. If a dealership knowingly fails to disclose material facts or knowingly sells a car with hidden defects, it can be held liable under both state and federal consumer protection laws.
Vehicle History Reports and Transparency
It’s crucial to understand the car’s history when buying a used car from the dealership. It’s recommended to obtain a VHR (vehicle history report) from CARFAX as it will provide information about the car’s accident and damage history, odometer verification, ownership and title information, service and maintenance records, as well as information as to whether the car has been subject to any recalls. This information will help you make an informed decision when buying a used car.
It’s also recommended to obtain an inspection from a third-party mechanic who can make a comprehensive check of the car and alert you of any existing or potential issues.
In addition, there are many ways a dealership can further provide a sense of quality and trust:
- Transparency: Reputable dealerships will provide clear documentation about a car’s history and inform you of any previous repairs or reconditioning work.
- Advertising: Honest advertising will include information about the car’s true condition, including mileage, accident history and disclosure of any damages.
- Warranties: Both manufacturer and dealership-backed warranties offer peace of mind about the car’s quality and reassurance if there are any future issues.
- Reviews: A good dealership will have good reviews, whether these are online or through word of mouth.
- Returns: Dealerships that offer return or exchange policies provide confidence in the quality of their cars.
- Memberships: Many reputable dealerships are members of industry associations such as the National Automobile Dealers Association (NADA).
- Licensing: If a dealer is licensed, it shows that they are complying with state and local laws.
Common Concerns About Dealership Purchases
Are Dealership Prices Higher Than Private Sellers?
Dealership prices are generally higher than private sellers because they have to take into account their overhead costs. However, they also often include the costs of reconditioning and inspections, as well as warranties and other services.
That said, buying from a dealership often means better negotiation flexibility. Here are a few tips for negotiating with a dealer:
- Research: Use resources like Edmunds and Kelley Blue Book to check on the car’s model and value so that you have something to back up your offer with the dealer. You should also check comparable used car listings in your area.
- Start low: It’s best to start with a lower offer than you’re willing to pay, as it gives you room to negotiate upwards.
- Total: It’s important to consider the total cost of ownership, including maintenance, fuel and insurance. You should also consider the financing options being offered.
- Incentives: Ask the dealer about any additional incentives they’d be willing to include, like warranties or other coverage.
How to Spot a Reputable Dealership
There are a number of signs a dealership will show to demonstrate that they are trustworthy:
- Pricing: A good dealership should have clear pricing with any additional fees disclosed up front. They should also have clear financing terms and not pressure you into making a purchase.
- Reputation: We pay attention to reviews and reputations for a reason. If a dealership has been operating for many years and has a good reputation, then this is a good sign.
- Policies: Trustworthy dealerships will have fair and clear return and exchange policies.
- Professionalism: A reputable dealership will have professional and knowledgeable staff. They will also have a well-maintained showroom with dedicated customer service areas. They may also offer personalized and after-sales services.
In addition, it’s recommended to check online reviews and dealer certifications. Not only should you read customer reviews, but also take note of how dealerships respond to negative comments. A good dealership should respond and show that they are working to acknowledge issues. You should also check whether the dealership has been certified by car manufacturers and has the Better Business Bureau Accreditation.