If you need a new car, the process is pretty straightforward. Find a car you like, get some new car price quotes from competing dealers and then head to the dealership with the lowest price.
Shopping for a used car gets a little more complicated. When you're shopping used, you can buy from a whole slew of places -- a new car dealership's used car inventory, an independent dealership, a massive used car retailer or a private seller. You even have the option to buy a car online through sites like eBay or Craigslist.
So, with so many options, where should you shop?
1. A Dealership
A dealerships’s used car inventory is made up of all kinds of cars. Some the dealership probably bought at auction, while others the dealership may have gotten as trade-ins on new cars. Dealerships typically have a lot of expenses; they have a showroom to maintain, a large staff to pay and a lot of cars to keep on the lot. That means they'll be passing some of those costs on to buyers. However, dealerships often offer a lot of buyer services, like financing, in house. Also, many dealerships offer certified pre-owned models that come pre-inspected and possibly even with warranties.
Pros: In-house financing, certified pre-owned models
Cons: Higher costs to the dealer can mean higher prices for car shoppers, may specialize in only one type of used car
2. Independent Dealerships
An independent dealership is one that isn't affiliated with any new car brand, which means it sells only used cars. Without a new car inventory to maintain, independent dealerships can have lower operating costs than other dealers, which can lead to lower prices. They tend to buy most of their inventory at auction, which means they have their finger on the pulse of the used car market. However, because they're buying all sorts of different cars, they may not have the expertise to answer questions about the different brands. Finally, since they tend to be smaller, independent dealerships may not offer financing -- and those that do offer financing may not offer it at competitive rates.
Pro: Prices can be lower
Cons: May not have the expertise you're looking for, may not have competitive financing available
3. Used-Car Retailers
Used-car retailers like CarMax maintain a huge inventory of used cars that they usually buy at auction. Like new car dealers, they maintain a showroom and have professional sales staff. That also means they have extra costs that they'll need to pass on to buyers. But that’s really the only drawback. Retailers tend to offer warranties and in-house financing on the cars they sell. Even better, some used car retailers have no-haggle pricing, which makes the buying experience much less stressful and makes it easier for you to compare pricing.
Pros: New car dealer experience, in-house financing, no-haggle pricing, may offer warranties
Cons: Extra costs mean prices may be higher; some buyers may want to haggle for the best deal
4. Private Sellers
Private sellers don't maintain showrooms or staffs, so their costs are almost nothing. That usually means that they can sell their cars at a much lower price than any dealer. However, that also means that you're left to find financing and do all the paperwork yourself. And while prices tend to be lower with private sellers, some sellers may have an inflated idea of their car's value and be unwilling to negotiate. Most importantly, when you work with a dealership -- even an independent one -- you're dealing with a regulated business. You'll have some recourse if the sale goes sour, and you know that the car you buy from a dealership is theirs to sell. It's rare, but some private sellers have sold stolen cars. So while you can get a great deal by buying from an individual, you have to be on your toes. For helpful tips, see our article on Buying a Car From a Private Seller.
Pros: Low prices, more flexibility
Cons: You have to set up your own financing, do your own paperwork and make sure everything is on the up and up
Online used car listings have made it easy for buyers to find and compare cars. Using an online auction site such as eBay, you can even buy the car online. However, before you open up Paypal, be aware that the same people who are selling cars offline -- dealerships, independent dealers, retailers and private sellers -- are selling them online. That means that online car buyers face the same opportunities and pitfalls as they would offline. Also, it's pretty tough to fully examine a car just by looking at pictures posted by the seller. If you buy a used car from out of state, you not only need to figure out how you're going to get it home, but you may also be subject to paying the sales tax or registration fees twice (once in the state you buy, once in your home state). Finally, while it's possible to get a great deal from an online auction site, it's also possible to get caught up in the bidding and pay more than a car is worth. See our article on Used-Car Red Flags for more tips.
Pros: Lots of listings to compare and find the best price; you can shop from your couch
Cons: It’s tough to examine a car online; you still have to deal with a private seller in many cases
The best place to buy a used car really depends on what kind of shopper you are. If you like things to be relatively easy and are willing to pay a little extra to make sure that happens, then a dealership or used car retailer is the place for you. You'll get a large inventory to choose from, available in-house financing, and in some cases, a warranty. If you want to save and don’t mind some extra work, then buying from a private seller or independent dealer is the way to go.
So what about online sales? Any used car shopper should check out online used car listings to see what's available in their price range. But if you want to buy online, keep in mind that you'll face the same challenges as someone buying offline, and may even have a few extra hurdles to look out for. The bottom line is, no place is the best for every shopper. Finding the best place to buy a used car is really about finding the best place for you.