Car Prices Explained: Private Sales; Forecourt Sales; and Part Exchanges - Used Car Buying Guide

Used Car Buying Guide

When you start looking at buying a car or selling a car, the whole concept of how car prices are put together can seem quite peculiar. If you buy a second-hand car from a dealership, for example, you pay more for the same make and model than if you buy it from a private seller. Also, you may receive preferential rates if you part exchange your old vehicle with a  specific garage – essentially paying slightly less for the same make and model than if you have bought it at the full forecourt price.

The car industry sets its prices according to a number of guides, which are used by traders and garage owners to determine the value of the vehicles they sell. This value is the product of a matrix of different factors, which may include the mileage of the vehicle and the location in which it has been driven, as well as what it is.

The prices listed in these guides may not correlate to the price asked for and paid by private sellers and their customers. This is because the actual demand for certain vehicles is dictated by immediate availability rather than the book value of a certain make and model with a specific mileage attached to it.

For instance, buying a pre-owned van in Devon costs more than buying the same pre-owned van in Birmingham: despite the fact that the actual physical condition of a Devonshire van, which has had to live with sea salt and sand in the air, is likely to be worse than the physical condition of a van in Birmingham. This is a factor of demand. In Devon, vans are in short supply (because of the sea air) and are always required by the majority of local businesses, which revolve around grounds maintenance, construction, and farming. In Birmingham, on the other hand, there are plenty of vans and no sea air to hurt them. So it’s a lot easier to find one worth owning.

When a person in the market for a vehicle of any sort becomes aware that these local factors can affect car prices, he or she also begins to realize that the price of driving into the middle of the country to buy his or her next vehicle may be offset by the drop in price he or she pays for the new ride.

In general terms, the difference in price between a private sale (normally cheaper) and a forecourt sale can be explained by the security blanket the forecourt sale offers. Private selling is done “as seen”, which essentially means that the buyer is liable for any faults. If you buy a car for six thousand pounds from a private seller, and it blows up on the way home, you just lose six thousand pounds. If, on the other hand, you buy it from a forecourt and it dies on the way home, the trader is legally obliged to fix or replace it to the reasonable value of the sale you have just concluded. So there is a greater risk for private sales. Also, the transfer of money becomes a risk and practical issue for private sales.

Car prices may further be complicated, as noted, by the prospect of a part exchange. Where you part exchange your existing vehicle against a newer one, the book value of the existing car is taken into account as you take money away from the sale price of the newer one.

When you part-ex your old car however you lose twice as you lose bargaining power as they 'make out' they are doing you a favor of convenience. And in some cases, there is work for them to sell your old car. And in return for taking your old car, they don't allow you to argue the price too much anyway. So it is a hassle but selling your old car first and then negotiating without a 'trade in' is the best way. However, the rates given by some online websites for your car are too low below market value and should also be avoided. 

Buying a car at Auction

Have a look and ask around to find your local car auction location. Do go along and try very hard not to buy until you have been a couple of times so your emotions and impulses are switched off.

Summary

Private sales offer the best deals but come with greater risk. That is not to say that dealers are risk free. There are many worth avoiding. Beware the vehicle you buy that needs further preparation as tires can be changed and items swapped out be less honest dealers. Do your research with the dealers as much as your car. I have personally experienced a specific 'dealer' who changes their name every 2 years or so because they just don't get good reviews and feedback. If you do find a good dealer then know that any warranty is going to have limitations. If you start searching about car warranties online you will start to see they are less than you would expect generally speaking. Do spend time on your vehicle purchase as it will benefit you to find the right trustworthy seller and you will save money. However the risk in buying used cars is ever present.

 Caitlin Morgan is a motoring journalist. She is currently working on an article comparing car prices between private and public sales.