There essentially five kinds of used car dealers from which you might buy. There are advantages and disadvantages to each type. Let’s take a closer look now.
Large Chain Used Car Dealers
Carmax is the best known of all the large used car dealer chains. They have stores all around the U.S. and typically have hundreds of high-quality vehicles to choose from. They have a no-haggle price policy, which means the buying process is easy and stress-free, although you may pay a little higher price than you might elsewhere. But for the price, you get a good car that has been inspected, comes with a warranty, and a return policy — all things that you won’t get elsewhere.
Some Carmax locations also sell brand new cars of a particular brand.
There are other large chain dealers such as AutoNation that are similar to Carmax.
New-Car Dealers with Used-Car Lots
Most new-car dealers also sell used cars from a separate lot that might be adjacent to their new-car showroom, or in a different location. Their used cars are typically late models in good condition that have been taken in as trade vehicles or lease returns. The best vehicles are inspected, repaired if needed, given a short warranty, and sold as “certified” used cars.
New-car dealers’ used cars tend to be newer than those sold by independent used-car dealers, and are priced higher, in general. Dealers usually have a lot of profit margin built into used cars. In fact, most such dealers make more profit on used cars than on brand new cars. Buyers should know that the prices marked on used cars are “asking” prices and that those prices should be negotiated down by as much as 10%-15%, if possible.
Customers should resist buying an extended warranty from such dealers. They are overpriced and a big additional profit item for the dealer. Instead, look elsewhere for your warranty — or simply set aside money for repairs in the future.
Large Independent Used Car Dealers
Independent dealers are not associated with a new-car dealer and are privately owned. These types of dealers sell both late-model and older vehicles. They typically buy their vehicles at dealer-only used car auctions. Quality and reliability of such vehicles can vary from poor to excellent, and are rarely inspected or repaired by the dealer. The vehicles are sold “as-is” which means there are no guarantees or warranties. Buyers should always arrange to have their prospective purchases inspected by a professional mechanic before papers are signed.
Again, prices marked on the vehicles are only “asking” prices. Buyers should expect to get a lower price, particularly if problems are discovered during the test drive or by the professional mechanic’s inspection.
Small Independent Used Car Dealers
Although some small dealers specialize in higher-priced luxury cars, most sell older cars with high mileage — and lower prices, which attract buyers who are looking for bargains, have poor credit, and little cash. The risk of getting a bad deal is much greater at these kinds of dealers. Since the cars are older with lots of miles, there is a higher chance that there are serious and expensive problems — which makes it even more important to get an inspection from a good mechanic. Buyers should not rely on the word of the dealer that a car “runs fine” or “has no problems.” Remember, all sales are “as-is” with no right to return, even if the car breaks down on the way home from the dealer.
Buy-Here-Pay-Here Used Car Dealers
This is a special version of a small independent car dealer, that finances his own loans (doesn’t use a bank or finance company like other dealers). He specializes in sales to people who have credit problems that prevents them from getting a car loan at a bank or normal dealer. His cars are usually older models that may be in poor condition. The cars are often overpriced. He doesn’t check credit but his loans have the highest interest rate allowed by the laws in that state. And his payment terms are very strict such that the slightest infraction (late or missed payments) will result in a repossession. Buyers are urged to avoid this type of dealer if at all possible.