When buying a car, you may want to look for ways to get the lowest price possible without sacrificing quality. Among the various ways to snag a good deal on a vehicle is buying a demo car. Short for a ‘demonstration’ vehicle, a demo car is one that’s been used by a dealership for things like test drives, temporary vehicles for dealership employees, or promotional events. But while demo cars can offer significant savings, there are certain considerations to make. Read on to find out what you need to know about buying a demo car to help you determine if it’s the right choice for you.
Key Points
- A demo car is a vehicle used by a dealership that has never been registered to an individual owner.
- Dealerships use demo cars for test drives, promotional events, or employee use.
- Demo cars present potential deals for car buyers, as they’re relatively new and come with discounts typically between 15% to 25% off the new-car sticker price.
What Is A Demo Car?
A demo car is a vehicle that’s been used by a dealership for various purposes, but was never previously owned by an individual. Demo cars are not technically brand new, so they can be considered used to some degree. That said, they can be as new as the same model year in which they are being sold, though they tend to have higher mileage as a result of their extensive use.
Types Of Demo Cars
When buying a new or used vehicle, it’s important to make sure you’re getting a good deal on a car that suits you. Demo cars are no exception, and there are several types you can test drive, including:
- Runout Models – Some demo cars become reasonably priced when a dealership or manufacturer sells off their older vehicles in favour of the newest generations. Although you would have to settle for an outdated car, it will often be in great shape with fewer kilometers on it.
- Test Drive Vehicles – Some demo cars may be used to take potential car buyers out for test drives before they commit to a vehicle purchase.
- Dealer Demos – A dealer demo car is loaned out to employees or other customers. It may be a basic floor version for test drives or a nicer car for executives but a newer model nonetheless. While there may be mileage and wear on it, dealers want to sell demo cars quickly, so bargains are possible.
- Factory Demos – When you see a car in a commercial or at a promotional event, like an exhibition, it’s normally a factory demonstrator straight from the manufacturer. As soon as the car accumulates some wear and tear and doesn’t look brand new anymore, it gets delivered to a dealership to be sold.
- Courtesy Cars – If you bring your vehicle back to the dealership for overnight servicing or repairs, they may loan you a demo car as a “courtesy”. Be careful when buying a courtesy car, because it may be in better shape than other used cars but could have more mileage on it than a regular dealer demo.
Benefits Of Buying A Demo Car
Since a car is one of the biggest expenses you can take on, it’s a good idea to write out a pros and cons list for each vehicle you’re interested in before you make your final choice. Here are some perks of buying a demo car:
- Better Prices – The lower price of most demo cars is one of the main benefits. In fact, some demo cars are hundreds, if not thousands of dollars cheaper and may only be 1 or 2 years older than a new car.
- Newer And More Reliable Vehicles – Buying privately can be cheaper, but it’s tough to know a car’s true condition. However, demo cars sold by reputable dealers should be in good shape inside and out, sometimes with low mileage and no mechanical issues.
- More Updated Features – Many demos come with specialized features and have only been driven by dealership employees. Plus, the dealer may offer special upgrades, rebates, promotions, and warranties.
- Drive It As Soon As You Buy It – Brand new cars can involve more paperwork and lengthy waiting periods for delivery. On the other hand, most demo cars can be bought and driven off the lot within the same day.
Drawbacks Of Buying A Demo Car
Despite the benefits above, there are certain downsides to consider:
- Mileage and Wear – Although demo cars may be newer, many have been used by multiple drivers. So, not only can they come with mileage and wear and tear, they may have less resale value and coverage when it comes to warranties if they’re over a certain number of kilometers.
- Fewer Options – Demo cars are not always readily available. You might have to visit a few places before you find a demo car that has everything you want. Plus, your options may be limited to older models with fewer features, colour choices, and guarantees compared to most new cars.
- Parts Need Changing Faster – Depending on how hard your demo car has already been driven, the tires, interior features and mechanical components may have to be repaired or replaced a lot sooner compared to new cars to avoid problems.
- More Risk – A demo car may be in worse shape than a dealer lets on. There’s also less proof of its history, as it hasn’t been sold before.
How Much Can I Save On A Demo Car?
The amount of savings you may get on a demo car varies greatly based on factors like its age, model type, features, how it was previously used, and mileage. That said, you can save a few thousand dollars compared to the new car price, on average.
Generally speaking, you can expect to save roughly 15% to 25% off the Manufacturer’s Suggested Retail Price (MSRP) of a new model. So, if the MSRP of a new version of the model you’re looking at is $45,000, you could potentially save anywhere from $6,750 and $11,250.
Where Can You Buy A Demo Car In Canada?
There are several places you can purchase a demonstrator vehicle, including auctions and sponsored events. That said, most demo cars are sold by dealerships that are getting rid of older models to make space for new ones. They’re typically displayed on the showroom floor, used for test driving, or loaned to employees and clients.
How Can You Finance A Demo Car?
Prior to buying a demo car, it’s also important to think about how you’ll pay for it. While it’s probably cheaper than the average new car, you might not be able to afford it in cash. Thankfully, there are ways to finance the purchase of a demo car, such as the following:
- In-House Financing – Most dealerships and vehicle-based lenders may offer in-house loans that allow you to finance a demo car with several months or years of payments. In-house financing can be arranged with a third-party financial institution or a division of the manufacturer as well.
- Bank Car Loan – Lenders offer car loans that use your car as collateral to secure the loan. You’ll be provided with a lump sum of money to pay for the vehicle, then make regular installment payments spread out over a loan term to pay off the loan.
- Traditional Loan Or Line of Credit – If you’re a member of a bank or credit union, you may be eligible for a personal loan or line of credit to finance a demo car. However, you’ll need a longstanding relationship with your provider, a decent income, and good credit to qualify for a decent loan with a low interest rate.
- Leasing – Leasing means renting a car long-term, instead of financing it over time. Although you won’t own your demo car, you get to drive it temporarily and switch cars when the lease ends. Plus, payments are often lower, as long as you don’t break your lease early (which may lead to penalties).
Learn more: In-House Car Financing, Is It Right For You?
Things To Consider Before Buying A Demo Car
Though a demo car can be affordable and in relatively good condition, don’t forget to take these precautionary measures before you commit to a purchase:
Research The Vehicle
When it comes to any vehicle, including a demo car, research is key. Always check a car’s specs, driver reviews, and reliability issues.
Compare Demo Cars Vs Certified Pre-Owned Vehicles
Certified pre-owned vehicles (CPOs) can be great due to their provable registrations and histories. While the car could have more mileage and wear, it may include an extended warranty and free maintenance. Compare CPOs to demo cars to see which option may be best for you.
Get Familiar With The Demo Car’s Market Value
Prior to buying a demo car, check its resale value. Most cars depreciate fast, especially when they’ve already been driven. Dealers are out to make a profit, so they may try to charge more than what you should pay. But understanding the car’s market value will arm you with the information you need to make a more informed decision about what’s a fair price to pay.
Verify The Car’s History
Even if a demo car is from a good source, ask about its service history, see if it’s ever been registered, and get all the paperwork you can. Vehicle history reports will give you all the information you need about a car’s past, including whether it’s been involved in an accident.
Check The Warranty Date
Since demo cars are newer models, many dealers offer warranties with the sales price or for an extra fee. Read the warranty carefully before buying it to make sure you understand the expiry date and what’s covered or not covered.
Have The Car Inspected
Most demo cars have been used at some point, so you should always check the vehicle thoroughly for damage and get it inspected by a dependable third-party mechanic before you buy it, if possible.
Final Thoughts
A demo car is a great option for car buyers looking for a near-new vehicle at a lower price. However, some demo cars may have high mileage, depending on how they were used. Like any other car purchase, be sure to test drive the vehicle, have it inspected, and consider its mileage, particularly in terms of how it may affect the warranty.
