The Only Time to Buy from the Dealership
Generally, I recommend staying away from car dealerships as much as possible. After working in the #1 dealership on earth for a particular German luxury car, I know enough that it’s not worth the hassle and almost always ends up costing you more – particularly if you buy new.
With that said, there is one instance where buying from a car dealership can pay off, and that is by buying a Certified Pre-Owned car that is still quite new. If you buy a Porsche, for instance, which has only been driven for a year and less than 10,000 miles (which is not uncommon) under the Certified Pre-Owned program, the warranty will extend to 6 years and 100,000 miles. You can find a list of CPO warranty programs here.
To me, this is like having your cake and eating it too. Since the car has already suffered its initial depreciation, you don’t have to worry about it shedding thousands of dollars in value on your drive home. With the extended warranty, you don’t have to worry about getting stuck with an unreliable car, especially since it is backed by the manufacturer.
A car that has only been driven for a year or two with low mileage (preferably around 7,500 miles per year or less) will in all likelihood be indistinguishable from a brand new car. You will also have the same amount of time to drive the car under warranty as someone who bought a new car. The only difference will be that you can save somewhere in the neighborhood of 30-40% on such a car versus the brand new price.
Returning to the Porsche, Edmunds TMV puts the value of a 2006 Carrera 2S at $52,034 today (full dealer retail price). Not bad for a car with a base price of around $80,000, especially with a warranty good for 3 more years. Even if you can’t afford a Porsche, the same principle applies. Your total cost of ownership will be drastically lower since the depreciation is not nearly as steep as buying new and you’ll still be fully covered by the manufacturer warranty which will prevent you getting stuck with big repair bills.
As long as you can deal with the high pressure salespeople in the dealership and keep your cool while negotiating, buying a relatively new CPO car is not a bad way to go.
