Should You Buy a Demo Car?

Every once in awhile, you may come across a "demo" car for sale at a dealership.

Demo cars are new cars that have been driven by employees, family members, or customers of a the dealership for a few months. They usually have between 2,000 and 6,000 miles on the odometer, but they are not considered used vehicles.

Since they were never sold, they are legally considered new, so they qualify for all rebates, special financing, and the new car warranty. Demo units are obviously priced lower than a comparable new car, and at first glance seem to be a good way to get a deal on a "new" car, but there are a few things you need to watch out for.

Warranty

Although demo units are covered by the original manufacturer warranty just like any new car, you need to realize the warranty starts at mileage 0. If the car comes with a 3 year / 36,000 mile bumper to bumper warranty, and the demo unit already has 10,000 miles on the odometer, then a good chunk of your mileage protection has been used up.

You may be thinking "well, if I don't put a lot of miles on the car, I'm still covered for 3 years". Actually, this could be a problem as well. Warranty coverage begins when a dealer establishes an "in-service" date on the vehicle.

The dealer may have already placed the vehicle in-service, so you need to find out if they have done so and how long ago that was. That date is the day the new car warranty was put into effect and if they've been driving the car for 9 months, that's how much warranty they've used up already.

Wear and Tear

Most dealers use demo vehicles for their own personal use, but some dealers loan out the vehicles to service customers. If this is the case, the demo car may have been driven by dozens, even hundreds of different people.

Chances are, not all of those people drove the car carefully. Ask the dealer how many people used the vehicle and what it was used for. If you're comfortable with the vehicle history and the remaining warranty, then you can talk about price.

What Should You Pay for a Demo Car?

A good way to figure out what you should pay is to see what a comparable new car is selling for. Generally, you'll want a discount of 40 to 60 cents per mile driven. On a vehicle driven 5,000 miles, this comes out to a discount of between $2,000 and $3,000.

Just realize that demo vehicles are not always great deals, and in fact most experts recommend not buying them. But sometimes there are extra discounts provided by the dealer or manufacturer for demo vehicles, so if you do come across an exceptional deal, just pay attention to the warranty and past use before agreeing to purchase.