If you are interested in buying a demo car on sale at the local new car dealership, there are few things that you should know about these types of vehicles. Demo cars are typically those that are driven by sales managers or salespersons at the dealership. Demos are usually lent to dealership employees in order to draw attention to new models that are available at the dealer by allowing them to been seen on local streets and highways.
A demo car is a great way for dealerships to advertise new vehicles as it gives salespeople an opportunity to show prospective buyers and customers the vehicle in the community. Generally speaking, demo cars are sold for a discount when compared to other new vehicles at the dealership. However, there may be some hidden fees for a demo car that might not make it the deal you are led to believe it is.
New Demos Have Used Car Problems
Although most demo cars are sold as new vehicles because they have never been registered, they are in fact used cars. Also, many car manufacturers will not extend the mileage limit on a new car warranty because the vehicle has been used as a demo car. So, if you purchase a demo car with 4000 miles already on the odometer, the car manufacturer's warranty will only be valid for the original mileage limit minus 4000 miles.
For example, many car manufacturers offer a three year or 36,000 mile new car warranty on most vehicles. However, if you buy a demo car that already has 4000 miles on the odometer, then the manufacturer's warranty will only be good for an additional 32,000 miles. This means that if your car begins to have problems after you drive it over the 36,000 mile mark, you'll need to pay for repairs or parts out of your own pocket.
Hidden Insurance Costs
Many times, when you apply for car insurance, you will be required to list the original mileage for the vehicle on the date of purchase. Most of the time, you will have purchased a new vehicle that has less than 10 to 15 miles or so on the odometer. Even if the vehicle has 100 miles or so on the odometer, many insurance companies consider the vehicle as a new one.
However, if you purchase a demo vehicle that has several thousand miles on the odometer, the insurance company will probably rate the vehicle as a used vehicle and you may have to pay high insurance costs to receive coverage needed to cover the loan amount of the vehicle.
Even though the dealership will probably give you a discount on a demo vehicle, the discount that you receive will probably not be enough to make up for the difference between the amount you owe the vehicle and the market value of for the vehicle assigned by the insurance companies.
If you do want to purchase a demo vehicle, it is a good idea to purchase gap insurance coverage. This type of coverage will pay the difference between the amount you owe on the vehicle and the amount your insurance company pays in the event of a major accident where the car is totaled. This will add to the total cost of the vehicle as well.