Are Dealer Demo Models Really Good Deals?

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Are Dealer Demo Models Really Good Deals?

Cars are expensive no surprise there. If you have been a smart shopper, you have shopped auto loan quotes and know how much you can spend. You want to get the most car that those auto loan quotes will buy so it's easy to be tempted when a car salesmen pushes a demo car at a discount because it has 5000 miles on it.

Salesmen Push Products for a Reason

Did you know steak restaurants often lose money on steak dinners? That's why the waiter always suggests appetizers, drinks and dessert. He's not just trying to increase his tip. The manager knows these are high-profit items and tells the staff to push them.

This isn't a big deal when it's about a $3 piece of pie. However, it's a different story when you have $30,000 auto loan quotes riding on it.

Demo models are new cars with high mileage. It could be because the sales manager drove it for a few months or perhaps a customer bought it but the financing fell through. In most states the definition of a "used" car is one that has had a title, so both these cases are technically new cars even with thousands of miles.

Demos May Have Hidden Problems

A demo is a used car no matter what they call it. If you buy one, use caution. Mileage puts wear and tear on the car and many demos don't get proper maintenance. Most new cars have scheduled oil changes at 1,000 and 5,000 miles. Many demos skip this maintenance because the driver knows he isn't keeping the car.

Ask the dealer for documentation proving the maintenance schedule has been followed. If the car is due for additional maintenance, insist that it be done before you sign. Don't fall for promises of free service later.

Sometimes the car has been in a collision. Before buying any used car you should pull an accident history on it. Spending a few dollars now can reveal unseen damage from an accident the salesman "forgot" to tell you about.

Price Demos Like Used Cars

Any car loses $3,000 in price the instant it is used so if the car is less than six months old deduct that amount from MSRP. If older than six months, instead deduct 20% because that is how much cars depreciate in their first year. For a $30,000 MSRP that means $27,000 if it's less than six months old or $24,000 if older than six months.

Then deduct $0.15 per mile. This amount is the absolute maximum you should be willing to pay. If they want more, then it's not a good deal.

With this pricing formula and pre-approved auto loan quotes, car buyers have a very strong negotiating position. That strength, not the salesman's claims, is what makes a demo a good deal.