- When it comes to buying from a dealership or a private seller, the best option likely depends on your budget, risk tolerance, and how much due diligence you’re willing to do.
- Dealerships generally offer more protection, warranties, and convenience, but often at a higher price, while private sales can be cheaper but carry greater risk if checks aren’t done properly.
- Private buyers should always verify a car’s history, title, and condition, as issues like encumbrances, hidden damage or missing paperwork can leave you out of pocket.
There's no obvious 'best option' when it comes to buying a car through a dealership versus a private seller and the most appropriate choice for you will likely come down to your own wants, needs, and situation. Buying a car from a dealership is the only way you'll get a true 'new' car and having a dealership warranty may give you valuable peace of mind. Buying from a private seller, on the other hand, can mean getting a lower price or a more suitable car, depending on your needs.
Both offer their benefits and both have notable drawbacks. Here's all you need to know about buying a car through a business set up to sell vehicles and purchasing from another everyday Joe.
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Savings.com.au’s two cents
There are financial pitfalls to both car dealers and private sellers: you could end up paying too much after getting fleeced by a car salesman, or you could waste money on a car that breaks down the instant you’ve put your name on it.
But private car sales can offer a better opportunity to save big money, so long as you do your due diligence. This includes researching the used car market for your ideal wheels, arranging for a professional inspection of the car, and conducting background checks for any past write-offs or outstanding debts.
Car dealership versus private seller: Key considerations
When buying a secondhand car, cost often comes first and foremost. Dealerships and private sellers can both lend financial advantages over the other if you get it right.
Cost of buying from a dealership compared to a private seller
Buying a car through a dealership is often more expensive than buying from a private seller, at least up front. However, the convenience and peace of mind can make the premium worth it.
Private sellers don't have the same overheads or ongoing responsibilities as dealerships, and therefore often offer better prices. There’s also a greater chance the seller isn't fully aware of a car’s value or that they're more concerned about selling a vehicle quickly than getting top-dollar. On the flipside, a private seller might have an over-inflated sense of what their car is worth.
Warranties, guarantees, and encumbrances
Licensed car dealerships usually offer cars that:
- Have been thoroughly inspected and/or repaired
- Are guaranteed to have a clear title
Ergo, dealerships only sell cars that haven't been unconditionally written off or stolen and that don't have finance owing. - Come with statutory warranties and cooling-off periods
Enforced by state governments, these protect used car buyers from major faults. - 'Drive-away' price tags that include the cost of stamp duty and registration
Crucially, when buying through a private seller you should check that there isn’t an encumbrance on the car (i.e. there isn’t a debt or finance owing on it). If you buy an encumbered car and the seller defaults on their debt, the lender could repossess the car from you despite the debt not being yours!
There's a simple way to check whether a car has a clear title - just search Vehicle Identification Number (VIN) on the Personal Property Securities Register (PPSR) for as little as $2 per search.
Quality and trustworthiness: Dealerships versus private sellers
Saving money is only part of the equation for buying used cars. You also need to know that you’re getting a car that’s in good condition and if it’s not, it needs to at least be disclosed as such. While car salesmen are commonly used as caricatures of untrustworthiness, that's not necessarily the case in the real world.
Buying from a car dealer
Cars sold through licensed dealers may be less likely to break down soon after the purchase date and, if they do, the repairs may be covered by a statutory warranty for a period of time. Also, dealerships are responsible for removing any encumbrances from cars before their sale, so you don’t have to worry about your car being repossessed because of an unpaid debt you don’t owe.
But, while you can generally be confident in the safety of the car, there’s a bit of a grey area in terms of trusting the dealership; they may overcharge for extras you might not need, such as rustproofing or extended warranties. There’s also the possibility the dealer may try and outright sting you with a higher price - you can combat this by arming yourself with knowledge of the car market.
Buying from a private seller
Any peace of mind offered by dealerships can, unfortunately, be sacrificed for a cheaper price when purchasing through a private seller. While some sellers would have done their due diligence and properly valued the car based on its current condition, others won’t know what’s going on inside and out. You should always look at the following aspects of the car:
- The outside: Paintwork, damage to the tyres and panels, oil leaks, and broken windows should all be considered
- The inside: Working seatbelts, working lights and accessories, and wear and tear on the seats and carpets is important to note
- Under the bonnet: Check the compliance plate, radiator cap, battery and cooling fans for signs of corrosion or damage
If you aren’t comfortable doing this, you can arrange to have a mechanic or inspector visit the car (for a price of course). You should also ask the owner to provide:
- An accident and owner history
- A car service history report
- Information on reported insurance claims and written off records
- Registration details
- Records that prove the odometer reading is correct
Never assume that the seller is being 100% honest with you, even if you know them, as it’s possible they don’t know all of these things about their car.
Still, there's a good chance you can find a regularly-serviced, carefully-driven car for a good price via a private sale. After all, a loving car owner is less likely to part with their pride-and-joy for a low trade-in price at the dealership if they could get a higher price by selling it themselves.
Buying from dealer vs private seller: pros & cons
Pros of buying from a car dealership:
- Thoroughly inspected cars
- Guaranteed title (free of encumbrances)
- Legal protection, warranties and cooling-off periods
- Additional services (e.g. handle paperwork, accept trade-ins)
Cons of buying from a car dealership:
- Often more expensive
- Professional salespeople can pressure you into unnecessary purchases and add-ons
Pros of buying from a private seller:
- Can be cheaper than buying through a dealership
- You may be in a better position to negotiate
- Can find better quality, well cared for cars
Cons of buying from a private seller:
- The car might be encumbered
- It’s easier to get it wrong if you don’t know much about cars
- No warranties or cooling-off periods
- Less legal protection
- You and the seller are responsible for the paperwork (bill of sale, registration, transfer of title etc.)
- Harder to get a secured car loan
