I'm a big advocate of buying used cars to save BIG money. Indeed, I myself will never again buy a new car. You can save even more by buying that used vehicle from an individual rather than from a dealer.
Yes, there are some advantages to buying from a dealer, like the chance to purchase a vehicle with a warranty. But the way to get a rock-bottom price is to buy a car that's sitting in somebody's driveway. Let's take a look at the potential savings and some steps you should take to make sure you don't get burned.
Private owners typically sell cars for 10 to 15 percent less than dealers. You can see this difference in the way pricing guides such as Kelley Blue Book offer two levels, the dealer price and the individual price. Yes, it's more work but it's also one of the rare opportunities in life to save thousands all at once. Let me use a real-life example to "drive" this point home.
Let's say you're in the market for a 3-year-old Hyundai Elantra. I just went online and found a 2008 Elantra in excellent condition at a dealership near me for $12,988. Already, you're saving roughly $10,000 compared to the cost of buying the same vehicle new.
Now let's see how much more you can save by buying from an individual. Let's say we can get the 2008 Elantra for 12 percent less from an individual. That's right in the middle, because the rule of thumb is that individuals let vehicles go for 10 to 15 percent less, on average. Here's the math:
Dealer Price vs. Individual Price
2008 Hyundai Elantra from dealership: $12,988.
2008 Hyundai Elantra from individual: $11,429.
BIG SAVINGS = $1,559.
There you have it. A $1,559 savings by buying from an individual instead of a dealership. That's real money that you can use to buy something else you need. Like gas.
There are some precautions that I urge you to take when you buy from a private owner, however. After all, the sellers don't have a reputation to uphold like a business does. Ask the owner if you can look at the record of the original purchase and all the service records.
My husband and I once test drove a used car that an individual was selling, and while he was driving, I pored over the service tickets. At the bottom of the stack were a bunch of records that showed the owner had had to take the car back to the dealer for the same repair again and again. That's the definition of a lemon.
You must also take a look at the title before committing to the deal. You're trying to avoid buying a car the seller doesn't really have the right to sell you. Compare the name on the title to the name on the seller's driver's license to make sure they match.
Also, match the VIN number from the dashboard with what is written on the title. If you see a bank listed on the title as the lien holder, you and the seller should call the bank together and verify how the loan is to be paid off.
Finally, write up a formal bill of sale and keep a copy for as long as you own the car. Pay for the vehicle with a cashier's check instead of cash. That way there is a traceable record of your purchase if you run into trouble down the road.