Buying a used car from a dealer vs. a private seller

The article was originally published on March 11, 2020 and updated on May 30, 2025. 

There’s nothing quite like the freedom of owning your own car. The possibilities are endless: you can take a cross-country road trip, spend a weekend away with friends, or just hit your town’s country back roads for a few hours if the mood strikes.

However, for many Canadians, that freedom comes at a cost, as car ownership is expensive. That’s why, when purchasing a vehicle, buying used is often the smarter financial move as it’s typically more affordable.

You’ve probably heard the warning that new vehicles lose value as soon as you drive them off the lot. And, as it turns out, that’s pretty close to the truth. According to CARFAX, new cars lose 10% of their value in the first month of ownership, depreciating 20% in the first year from the date of purchase. They continue to lose value by 15% per year for the following four years.

Assuming that’s enough to sway you toward purchasing a used car, you’ll need to decide whether you should buy from a dealer vs. a private seller. This article will outline each option's pros and cons and help you choose when you’re in the market to buy a used car. 

What’s the difference in price when buying a car from a dealer vs. a private seller?

Buying a used car is cheaper than buying a new one, but there are other financial considerations between the two. Generally speaking, you can expect to get the same vehicle cheaper from a private sale than you can from a dealer.

Why is that? Dealers have more overhead costs they need to cover, so they need to make a profit on the cars they sell. Private sellers, on the other hand, are usually more willing to negotiate and get the vehicle off their hands.

Autotrader.ca is an excellent place to compare used car prices. You can filter by car make, model, and year to see how various available options stack up against one another. You can also compare mileage and location and get a sense of what you can expect to pay if you choose to purchase from a private seller or a dealer.

What are the financing options between a dealer vs. a private seller?

How you plan to pay for your used car is another important consideration.

While dealerships can offer in-house financing, allowing for monthly, bi-weekly, or weekly payments, private sellers require the entire purchase price up-front.

That’s not to say you can’t finance a used vehicle if you purchase privately, although it is less common. Before closing the deal, you’ll just need to secure financing from another institution, such as a bank or credit union. 

Getting a few car financing quotes is a good idea regardless of where you’ll purchase your car. A few phone calls, emails, or branch visits could save you hundreds throughout your car’s lifetime.

Also read: 6 factors affecting your car loan

What are the advantages of buying a car at a dealership vs. on the private market?

Buying a used car from a dealer

One advantage of purchasing from a dealer is the peace of mind of buying a certified pre-owned vehicle.  This ensures you get a licensed and brand-expert mechanic performing a detailed inspection, using original equipment manufacturer (OEM) parts. They also give you the CARFAX report of ownership, accidents, and repairs the car has received.

Another advantage of purchasing from a dealer is getting a warranty. Many will provide short-term warranties to cover any sort of manufacturing defect. These typically last a month or more, which might be enough to feel confident that you aren’t buying a lemon. Dealers also have a reputation to uphold, so they won’t purposely sell a defective vehicle.

Private used car sales

On the flip side, when purchasing privately, you know who previously owned the car (assuming they’re the first and only owner). This knowledge might offer some confidence when purchasing a used vehicle.

However, it’s important to do your due diligence. Complete a thorough test drive to assess the car's handling. Ask yourself:

• How does it shift from park to drive?
• Does it make noises when in reverse?
• Do the brakes feel okay?
• Do the windows open and close? 

You might also be able to score extra bonuses from a private seller, such as winter tires or specialized mats.

How to protect yourself from private used car sales

Check the used vehicle information package

In Ontario, sellers are legally required to provide you with a used vehicle information package (UVIP) when selling a second-hand vehicle. You should make sure that all the information listed in the package matches up with the car you’re buying. Details of the car that can be found in the UVIP include:

• The vehicle condition, year, make, model, colour, body type, cylinders, and power
• The registration history in Ontario (present and previous owners of the vehicle)
• The lien information
• The average wholesale value
• The retail sales tax information
• The bill of sale

Check the vehicle history report 

Consider buying your own vehicle history report from CARFAX. It can tell you about any accidents the vehicle was involved in and any unfixed safety recalls, giving you some potential insight into how well the previous owner cared for their car.

Check for outstanding liens

You can also purchase a lien check from CARFAX along with your vehicle history report. If your car has a lien registered against it, that means an interest in the vehicle has been given to a third-party lender (e.g. bank, financial institution). The vehicle is typically used as security or collateral for a loan, so if the debt hasn’t been repaid, the lender gains ownership of the car. 

That’s why checking for outstanding liens is important – you could be responsible for paying off the remaining debt. And you wouldn’t want to lose your new-to-you vehicle because someone else didn’t pay off the financing. 

Check the vehicle identification number (VIN)

One rising trend in car theft is the re-vinning of vehicles – thieves place what looks like a real VIN in the front dash of a stolen car to convince customers of a legitimate sale. To protect yourself, you can actually check your VIN with CARFAX to ensure that the electronic record matches with any hard copies you receive. And you can also look up VINs with the Government of Canada to ensure the car isn't filed as stolen.

What about car insurance? 

When buying a car from a dealer or private seller, you can test drive it using their insurance.  But before you take ownership of the vehicle, you must have auto insurance. If you haven’t compared car insurance quotes already, make sure to do so, as it could help narrow your decision depending on your budget.

Typically, insurance on older cars is about 8-10% cheaper. But, depending on the model, you could save as much as 50%. However, insurance for an older model car could cost more if it has a history of collisions, is prone to failure or gets stolen a lot.

Finally, don’t just take the owner’s word for it when they tell you what they pay for car insurance. For one, every driver is different, and driving records reflect that. But insurance premiums are based on location. For example, Toronto car insurance costs more than Burlington car insurance because of the frequency of theft, fraud, and population density. There are fewer accidents with fewer cars on the road.

The bottom line

There are plenty of financial advantages to purchasing a used car. There are also some advantages and disadvantages to buying from a car dealer vs. a private seller. Weigh your options, determine which route is best suited for you, and happy car shopping! 

One word of advice, regardless of how you procure your used vehicle, have it inspected by a reputable mechanic. If a seller has nothing to hide, they likely won’t mind you having someone you trust to take a look under the hood.

Also read: 

• How to buy a used car: After the sale 
• Leasing vs. financing a car (and how it affects your insurance)
• Buying vs. leasing a car in Canada – what's better?
• Best time to buy a new car in Canada