What’s the difference between buying private party versus buying from a dealer?

Posted Wednesday, Apr 12, 2017

What’s the difference between buying private party versus buying from a dealer?

Many people ask, what’s the advantage of buying from a dealer or a private party?  Won’t I pay more if I buy from a dealer?  What protections do I have?  What are all the fees dealers charge, and why?  We’re here to answer those questions and more for you.

What advantages do I have buying from a dealer?

Dealers are required by most states to sell a vehicle that has met a minimum safety requirement.  In California that includes a minimum of a vehicle’s lights, horn, windshield wipers, brakes, tires, seatbelts, airbags, windows, glass, & mirrors.  Many dealers will even go above and beyond that prior to offering a vehicle for sale, such as performing basic maintenance like oil changes, fluid flushes, belt replacement, as well as performing cosmetic repairs.  If you ask, most dealers can provide you a list of what was done on a vehicle prior to sale.  If you’re still not comfortable with the vehicle, you can request permission to take the car to an independent mechanic.  While it’s the dealer’s choice weather or not they allow you to do this, most dealers will allow it.  If they aren’t willing to let you have an independent mechanic look at the car, it’s probably a sign they may have something to hide.

How am I protected as a consumer?

Very little protections exist for consumers buying private party.  However legitimate car dealers such as Petrol Auto Sales in Sacramento, California are licensed with the Department of Motor Vehicles to sell cars in California, and are held to many standards specified in the California Motor Vehicle Code.  (They are also required to display at their place of business their county or city business license, along with their DMV dealer’s license.  If you have concerns about the legitimacy of a dealer, ask to see these licenses.)  Dealer licensing standards include financial protections for consumers harmed by dishonest dealers.  Like most businesses, car dealers will often go to great lengths to protect their reputation, and will do their best to handle any issues directly with the consumer prior to allowing a legal process to take place.  To learn more about the requirements to be a motor car dealer in California, visit the DMV’s website at www.dmv.ca.gov.

So how does all this boil down financially?

Dealers are obviously in business to make money.  The majority of their profits come from buying a car or truck at a wholesale price, and selling it at a higher, retail, price.  Repairing minor issues on a car such as fixing door dings, repairing flaws in the interior, performing emissions (SMOG) testing, as well as safety and cosmetic repairs, are just some of the services they provide in order to offer a vehicle at a retail price.  Also most dealers offer financing.  There’s a lot to consider regarding financing at a dealer versus securing your own financing ahead of time, but many lenders will offer more favorable financing terms when a car is bought from a dealer because of the checks, repairs, and inspections dealers perform prior to offering a vehicle for sale.

What about taxes and fees?

Every state’s laws and taxes are different, so check your local laws prior to doing business.  It’s a common myth that buying private party exempts you from having to pay sales tax in California.  That is simply not true.  Sales tax in California on any vehicle purchased is assessed at the time of sale, and is based on the buyers home address (where the vehicle will be parked most of the time).  When you buy from a dealer they will calculate taxes for you, collect all necessary taxes and DMV fees, then process everything on your behalf.  You simply take delivery of the car and wait for your permanent registration certificate to arrive in the mail.

When buying private party it is your responsibility to take the paperwork to DMV, at which time they will collect sales tax from you, and any DMV fees that are due.  CAUTION: Any car older than 3 years old and newer than 1975 requires a SMOG certificate prior to transfer of ownership in California.  If buying private party, always make sure the seller has smogged the car prior to sale. DMV will turn you away if you try and transfer ownership of a vehicle without a recent (less than 90 days) SMOG certificate on file.  While state law mandates that it is the seller’s responsibility to SMOG their vehicle prior to sale, if they fail to do this, it can be extremely difficult to chase down the seller and hold them accountable.  As the buyer you my get stuck trying to SMOG a vehicle, and if it fails, you could be out of luck. We recommend never buying a vehicle that the seller hasn’t smogged already themselves.  Buyer beware!

Private party sales can certainly have some advantages as well.  Most notably having an opportunity to talk with the prior owner of the vehicle.  They can clue you in to any common problems they’ve had on the vehicle, and how they’ve dealt with them.  The best private owners to buy from have kept records of all the services done on the vehicle.  You can look at these and know that the vehicle has been services properly and frequently, potentially saving you money in the long run.  Vehicles not properly maintained are more likely to need expensive repairs down the road.

What about title, and financing when buying from a private party?

Contact your preferred financial institution for instruction on how to finance a private party sale.  If the seller has the vehicle financed, find out what their pay-off is.  If the payoff amount differs from the selling price, be careful who you’re giving your money to.  There is a certain amount of trust required in buying a private party vehicle regarding who holds the title and how the vehicle is being paid for.  If something doesn’t feel right DO NOT move forward with the purchase.  There are people out there who will take your money, and claim they’ve lost the title, or they’ll mail it to you, or the vehicle isn’t in their name, but they have permission to sell it.  These are all red flags!  Be careful out there!  While you are protected by law if you’re acting in good faith and have filled out all the proper DMV paperwork, many people pulling these scams are pretty savvy and use fake names, or ID’s, and are nearly impossible to find after the fact.  Proceed with caution.

Don’t let all this scare you too much.  There’s lots of very honest car sellers out there, and buying a private party vehicle from one of these people can be a real pleasure.  Often times you can save a little money versus paying retail at a dealer, and get a well cared for car.

So where’s the best place to buy a car?

Petrol Auto Sales, in Sacramento, or course!  Well, in the end the choice is up to you.  The majority of used vehicles sold in the United States are financed, and are sold from new or pre-owned dealers, where consumers have protections they can rely on.  If you’re concerned about paying too much at a dealer, first decide what price you’re comfortable paying.  Find a car online you like, and make a straight-forward offer.  Many car shoppers make life more difficult on themselves when shopping at a car dealer because their afraid that being honest with the dealer will somehow cost them a good deal.  If you chose to shop at a dealership we recommend being up front about your wants, and your budget.  While used car prices don’t have the same flexibility in them as they once did, many dealers are still willing to negotiate in order to earn your business.

We hope you found this information helpful.  If you have any questions about the information in this article, or want help shopping for your next new or pre-owned vehicle, feel free to reach out to us at [email protected]

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