Buy Used Cars: Dealer Finaning Or Independent Lender?

Buy Used Cars: Dealer Finaning Or Independent Lender?

A used car is the cheap alternative to a new car. The market for used cars is huge and confusing. Bargain hunters usually find what they are looking for with private sellers.  Dealers are more expensive, but offer more security when buying. Find out what you should definitely consider when buying a used car.

Make, year of construction and maximum mileage: Thorsten has concrete ideas about his “new” used car. Private seller or dealer? Thorsten is unsure who is the better choice. The offers from private sellers are usually cheaper. However, Thorsten is no car expert. What if the vehicle has defects? Who is liable for obvious and hidden defects in a private sale?

Buying a car from a private seller: Disclaimer & description of condition

  • The seller does not have to point out all defects. This applies in particular to obvious defects such as scratches in the paint or minor dents.
  • If the prospective buyer discovers a presumed defect during the test drive, the seller must inform him/her about it.
  • In the case of a private car purchase contract, the seller must state in the description of condition whether the car has accidental damage or known defects. It should be stated which damages have been repaired or not repaired.
  • The seller can exclude liability for any undetected defects.
  • The seller can exclude liability for material defects in the purchase contract for defects unknown to him/her. It is subsequently difficult for the buyer to prove to the seller that he or she knew about the defect.
  • However, a general exclusion of liability is excluded: According to the BGH, clauses in which the warranty is completely excluded are invalid. This is because a complete exclusion would also exclude liability for physical injury and damage to health, which would constitute an unreasonable disadvantage for the buyer.
  • Excluded from all liability are basically defects resulting from age-appropriate wear and tear of parts of the vehicle.

There he is with the dealer but on the safe side, says Thorsten. After all, the commercial seller is legally liable for two years for material defects. For faults that existed before the sale. For used cars, this period can be contractually reduced to one year. In the first six months, the burden of proof lies with the seller: He must prove that the defect did not exist at the time of delivery. Commercial car dealers therefore check their cars very carefully before the sale.

Often a used car warranty is already included in the purchase price – or it is offered for an additional charge. In this case, the dealer must also repair any damage that occurs after the car is handed over. Sometimes the warranty also includes the replacement of wearing parts.

Thorsten does not want to take any risk and decides to buy from the dealer. Even if, according to ADAC, used cars from private individuals are about eight percent cheaper than those from the dealer.

How to find a cheap used car

Used cars can be found in regional newspapers or local advertising papers. Prospective buyers can get a good overview of what is on offer at car markets.

The largest selection at the best price can usually be found online. Used car portals such as or Autoscout24 are not only marketplaces, but also offer information on vehicle valuation, the sales contract and lots of checklists. Meta search engines like Autouncle search the sites of the individual providers and summarize their offers. Autouncle also displays the prices of the vehicle in relation to comparable offers using a five-stage traffic light – from “expensive” to “super price”.

Both private providers and dealers are represented on all platforms.

When buying a used car, make sure you pay attention to the following

Thorsten visits a car dealer near his home, who primarily sells his favourite car brand. He plans a visit in daylight and accompanied by a car expert friend. He advises him not to be deceived by appearances. In advance, both have informed themselves about the known defects of the model. This is possible, for example, via the DEKRA Used Car Report.

Checklist used cars

  • exterior bodywork: paint, colour differences, underbody protection, headlights, windscreen, tyre profiles
  • Engine compartment: oil and cooling water loss, corrosion, abnormal engine noise
  • Trunk: corrosion, moisture, spare wheel and jack
  • Bodywork downstairs: corrosion, oil loss, exhaust, wheel suspension, brake system
  • Bodywork inside: windscreen wiper, heater, blower, mirror adjustment, window lifter, seat adjustment, seat belt

Whoever buys privately and wants to be on the safe side, has a third party make a value appraisal or a condition report. This service is offered by independent appraisers, automobile clubs, authorised dealers and independent garages.

Optimum financing for used cars

The traders often advertise with low interest rates. But you should keep an eye on the total costs. The effective interest rate can be higher for an installment loan from a bank than for a dealer offer. However, the cost of the car plus the cost of the loan can be lower here.

Four financing options for a used car

  • Leasing: Here you acquire a right of use for a certain period of time. The car remains in the possession of the dealer. The rates are usually higher than for comparable credit rates.
  • The balloon loan is a mixture of leasing and instalment credit. Sometimes a down payment has to be made. The monthly installments are initially quite low, but in the end a high final payment (“balloon”) must be made.
  • Three-way loan: A balloon loan with down payment. The higher the down payment and the final payment, the cheaper the credit costs – but also the higher the charge. The “three ways”:
  • At the end of the term the undamaged car can be returned. The car can be taken over with payment of the final installment or the final payment is stalled in installments.
  • Instalment credit: A car loan without final payment, such as offered by Credit company. Advantage: You can pay the seller in cash. The dealer will then offer you an attractive discount, which is often higher than the costs associated with the car loan. More on the topic: Buying a car from the dealer: Paying cash or financing?

The dealer offers Thorsten a high discount for cash payment. He therefore decides to finance the purchase with an instalment credit. He can conclude the car loan from Credit company online very quickly and easily and drive his “new old one” home soon.