The lure of finding a great deal is what often attracts people to the private seller.
You can test out your negotiation skills, land a bargain, and you have a story to share at every BBQ you attend for the next ten years!
The reality is that it is a gigantic time suck that is fraught with risk when compared to buying through a licensed dealership.
In this article, we will conduct a detailed comparison of the buying process through a private seller vs a dealership so you can make an informed decision.
Quick Summary
We will look at 10 elements of the buying process as part of the comparison. So you fully understand the risks and benefits of dealerships compared to private sellers.
The outcome is so lopsided that it is not even worth keeping score.
A private seller is the best option for one reason only – you may get a cheaper price.
Due to a combination of legal protections, licensing, and the desire of a dealership to stay in business for the long term, they are clearly lower risk and/or better options in each of the following areas:
- Fraud Risk
- Mechanical Risk
- Reputational Risk
- Warranties
- Legal Protections
- Transfering Ownership
- Convenience
- Obligation to Complete Transaction
- Trade-in Availability
Defining the Buying Channels
For the purpose of this article, we will be using the following definitions:
- Dealership – any entity that holds a motor dealers license in the relevant state and uses to trade vehicles.
- Private Sellers – your average person on the street who is trying to sell their vehicle.
Private Seller vs Dealerships Comparison
In this section, we will do a direct comparison on a number of points of consideration when choosing where to buy your next vehicle.
We are a dealership, of course, and you may find our point of view biased. So I encourage you to keep your own score on each point as we go through.
The outcome may be different for your circumstances.
1. Price
The price difference between a dealership and a private seller is the most common reason for people wanting to go private.
Selling a car is inconvenient and you may find a weary seller will be more flexible on price just so they don’t have to deal with any more potential buyers!
Whereas a dealership has a business to run and deal with buyers every day. If one specific car takes an extra week to sell its less of an issue.
However, the opposite can also be true. A private seller can overestimate the value of their car and be unreasonably stubborn!
A dealership wants to sell the car quickly, and, at a fair price. Squeezing every dollar out of the deal can result in months of extra holding time!
But if you want a cheaper deal, on average you will do better with the private seller.
2. Fraud Risk
A dealership has a number of legal obligations to uphold as part of its license, the state’s fair trading regulations, and Australian Consumer Law.
While the industry has been the butt of the joke for decades, these regulations have gone a long way to removing bad actors from the industry in Australia.
There are severe penalties for fraudulent conduct, making deception far less common in their transactions.
In addition to this any business that wants to stay in business long term needs to offer great value to their customers.
And committing fraud is not the way to do it!
A private seller is not subject to many of these regulations and buyer beware can be the general attitude of many sellers.
Especially if the vehicle has been involved in an accident in the past, or has finance still outstanding.
It is on the buyer to conduct the proper checks.
3. Mechanical Risk
Dealerships are required to get a roadworthy certificate for each vehicle prior to sale, and will also register the vehicle prior to transferring ownership.
In addition, there is a three-month statutory warranty the dealership is liable for with every sale.
These are built-in safeguards when buying from a licensed dealership.
At Gusto Auto, we carefully select vehicles and go to great lengths to ensure they are in excellent working order before they make it into the lot!
The issue with a private seller is that they may not know enough about cars in general to give you an accurate assessment of the vehicle.
And if they do, you are relying on them being totally upfront with problems on a vehicle they are trying to sell for as much as they can.
Your interests just don’t align with theirs!
You should also get an independent mechanic to look at the vehicle prior to completing the transaction. But this takes time, money, and you risk the vehicle being sold to another party.
4. Reputational Risk
In the age of social media and online review platforms, it has never been easier to share a bad experience with a business.
A dealership simply has too much to lose by selling dud cars.
A private seller has no long-term stake in the vehicle. Once the car is sold, their involvement ends, and you have no recourse.
5. Warranty
Dealerships are obliged to provide a three-month statutory warranty. In some cases, an extended warranty could also be negotiated as part of the purchase.
This protection can be invaluable if mechanical faults emerge after the sale.
A private seller will not provide any guarantee once you drive off with the vehicle.
6. Legal Protections
Australian consumer law offers stronger safeguards when buying through a dealership.
Dealers are obliged to uphold certain standards, and buyers have recourse if things go wrong.
None of this applies to a private sale. Any legal recourse would be an expensive civil matter and entirely not worth your time.
7. Transfer of Ownership
At a dealership, the ownership transfer is usually handled as part of the sales paperwork.
A private sale requires you to lodge transfer paperwork yourself, and mistakes can cause administrative headaches down the track.
8. Convenience
Dealerships have a range of vehicles that you could test drive in the one visit.
If you need finance, you can also get that sorted at the same time.
Insurance, extended warranties, trade-ins… It’s just faster and easier!
Private sales can be time-consuming. You are relying on sellers who may have multiple buyers lined up and limited availability to see you.
The back-and-forth messaging, multiple inspections, and test drives can get old really quickly!
9. Obligation to Complete the Transaction
So, you have finally found the vehicle you want at a great price!
You have done a test drive and the seller has agreed on a price. But you want to do the right thing and organise a mechanic inspection, which will take a couple of days.
Before you can get it in there, the vehicle is sold to someone else. Back to the drawing board!
A private seller has no obligation to you and they just want the car sold. Which can lead to deals being missed unless you turn up with a paper bag full of cash.
In comparison, a dealership transaction is smooth and predictable.
At Gusto Auto, we will often take a car off the market when an appointment is set and only relist if they don’t make the purchase.
If a deposit is paid, then the vehicle is secured while payments are organised – without exception.
10. Option to Trade-In
We touched on this earlier in the convenience section. But it is worth mentioning as its own item due to how common it is.
Many buyers also have little interest in selling a car privately. A trade-in gives you a bit more negotiating power and is a convenient option.
Private sellers offer no such option. You’ll have to sell your old car separately, which can be a significant investment of time, money, and stress.
Conclusion
If you know cars inside and out, then you may enjoy the process of hunting for your next car and finding a great deal.
A strong foundation of knowledge can overcome many of the risks associated with buying privately.
But it will never overcome the inconvenience!
So for most, buying from a used car dealership will save you time and will come with some built-in legal protections from buying a lemon.
