Buying a Used Car From a Used Car Dealer

If you’re interested in buying a used car, there are several options available. You can visit a dealer or buy one from a private seller on Craigslist.

The choice comes down to your personal preferences and how much money you want to spend on a vehicle. Before you get started, determine how much you can afford to spend and which features are absolutely essential.

Independent Dealerships

Independent dealers have no contracts with automakers and aren’t subject to franchise laws that stifle innovation. These dealerships often sell a wider range of makes and models, because they don’t have to follow automakers’ guidelines when it comes to buying inventory.

Independents also don’t have to spend extra money to meet a company’s strict guidelines, such as franchise training or loaner cars. That can save them money and help their business stay competitive.

Another big difference between franchise and independent car dealerships is the way they acquire vehicles for their lots. Rather than buying cars from the manufacturers, independents source their inventory through wholesale auctions and private sales, which are more flexible.

Because they don’t have to adhere to automakers’ strict guidelines, they may be able to offer lower prices on their used cars. Moreover, their lack of corporate overhead means they have more flexibility when it comes to financing and selling used cars to customers.

Large Chain Dealerships

Dealerships are important to the auto industry because they help car makers distribute and service cars. They also create a huge network of local dealerships where consumers can go if they have trouble with their car.

Moreover, dealerships can make repairs and replace parts on a vehicle anytime. This is particularly useful for older vehicles that are subject to manufacturer recalls or warranty work.

Another big selling point for large dealers is that they often provide a convenient way to trade in used vehicles. They can typically recondition your car and offer it for sale at retail prices, often significantly more than you would get from private parties.

However, despite the fact that these companies offer excellent services, they can be a pain for buyers. In addition, they can be stingy when it comes to offering a fair price on used vehicles. This can lead to frustrated buyers who want to get out of the deal quickly.

High-Risk Dealerships

Used car dealers face various risks, many of which aren’t easily identified or addressed. Among the most common exposures are theft of inventory and property on the premises, which is why they need special insurance to cover this risk.

The risk of fraud is another factor that used car dealers must be aware of, particularly when financing. Fraud occurs when the dealer or the loan applicant misrepresents the facts of a transaction.

High-risk dealers, like other businesses that finance their sales, should be evaluating their internal controls and making sure they’re in a place to protect against fraud. They should also be educating their staff about the importance of maintaining internal controls so they can prevent fraud from occurring in the first place.

Some of these dealers specialize in providing bad credit auto financing to customers with low credit scores, past bankruptcies, or other issues. This means they can offer flexible terms, lower interest rates, and even extend warranties on vehicles they sell to those with less than stellar credit.

Wholesale Dealerships

Wholesale dealers buy vehicles at auto auctions and resell them to used car dealerships for a profit. A good relationship with a wholesaler can provide dealers with valuable market intelligence.

The rise of online auctions has completely changed wholesaling. Instead of lugging aged inventory to an auto auction and competing with other bargain buyers, dealers can use streamlined online platforms to buy vehicles directly from thousands of wholesalers across the country.

Dealerships can even sell cars that they can’t move through their traditional wholesale partners and do so more quickly. This helps dealers avoid selling their aged units at a loss or risk of having checks bounce.

Wholesalers can also fix up auction finds that aren’t selling as they should be. This is a popular model, but it requires an understanding of local used-car values and market demand. It’s a time-consuming and risky way to make money.