Should You Buy A Demo Car?

Should You Buy A Demo Car?

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated September 29, 2021

When you can’t afford a new car, there are still plenty of ways to get yourself a decent used vehicle and save a bit of money in the process. For example, you can try buying from a private seller, checking out a second-hand dealership or attending a car auction. With the right job title, you may even be able to score a company vehicle. 

If you’ve decided to go the dealership route, another way you could save money on a slightly used vehicle is by purchasing a demo car.

What Is A Demo Car?

When you visit a dealership and test drive a new car, the vehicle may not be the one you actually end up buying. Instead, you’re probably driving a demonstrator or “demo” vehicle, which dealers lend out for test drives when inventory is running low. Dealership and manufacturer employees may drive demo cars temporarily for personal use too.

While the car is technically used, the dealer will usually sell it as “new” because it hasn’t been sold or registered before and shouldn’t have too much mileage on it (maybe a few hundred to a few thousand kilometers). No matter why it’s been driven, demo cars often come with lower prices due to the minimal amount of wear and tear they’ve been through.

If you’re lucky, you may even find a demo car that’s been driven by an executive and comes fully loaded with luxury features and add-ons. Car dealers may also negotiate on the price because they’re trying to get rid of demo cars and make way for new inventory.

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:

  • Older Models – Frequently called “runout” models, some demo cars become reasonably priced when a dealership or manufacturer sells off their older vehicles in favor of the newest generations. Although you would have to settle for an outdated car, it will often be in great shape with less than 10,000 kilometres on it.
  • Dealer Demos – As mentioned, 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 Demonstrators – 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.

Check out our list of tips on buying a car from a dealership.

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. For instance, buying a demo car can offer up the following benefits: 

  • Better Prices – The lower price of most demo cars is one of the primary things to consider. 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. 
  • Nicer & 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, with low mileage and no mechanical issues. 
  • Models, Features & Offers – If you’re willing to buy an older or used model, you can snag a higher-spec car that’s only been driven by dealership employees. Plus, the dealer may offer special upgrades, rebates, promotions and warranties.
  • You Can 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, some demo cars come with just as many drawbacks as any other vehicle you’re likely to buy, including but not limited to:

  • Mileage & Wear – Although demo cars may qualify as “new”, 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.
  • Less Choice – 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, color choices and guarantees than 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 changed a lot sooner than on a new car 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. If you finance the car, you may even end up with negative equity when your payments exceed its value.

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 workers 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 other ways to finance a demo car, such as:

  • In-House Financing – Most dealerships and vehicle-based lenders can 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.
  • 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 – Technically, 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).

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 pay anything or sign binding paperwork:

  • Do Research – When it comes to any vehicle, including a demo car, research is key. Always check a car’s specs, driver reviews and reliability issues. The same idea goes for the dealer or lender you’re thinking of buying or borrowing from.
  • Compare Demo Cars & 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.    
  • Get Familiar With the Demo Car’s Market Value – Prior to buying a demo car, it’s also essential to check its resale value. Most cars depreciate fast, especially when they’ve already been driven but dealers may still try to overcharge you.   
  • 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. There may be accidents or repairs the dealer won’t tell you about upfront.  
  • Check the Warranty Date – Since demo cars can qualify as “new”, many dealers offer warranties with the sales price or for an extra fee. Read a warranty carefully before buying it, as the expiry date and limited coverage may not be worthwhile. 
  • Determine if Your Car Loan is Secured – When you finance a demo car with a loan, your lender will be part-owner of its title until your payments are done. If you default, your car may be repossessed as collateral and resold to cover your debt.

Buying A Demo Car FAQs

How do I negotiate the price of a demo car?

When buying a demo car, negotiation is key. Although the car may look great on the surface, it’s not brand new, so there’s more potential for things to go wrong. Check out what similar cars are going for online. Some dealers will also let you take the car to an outside mechanic in exchange for a deposit. Once you know the car’s real market value, you can use it to haggle with the salesperson. If you can’t get the price down, try asking the dealer to throw in some add-ons and a better warranty.   

Can I save more money by purchasing a demo car?

Every dealership has a different way of pricing demo cars. Some will knock about 1% – 3% off the sales price per month the car has been driven, others adjust their discounts according to a car’s Manufacturer Suggested Retail Price (MSRP). Generally, demo cars with less mileage, fewer issues and better features go for higher prices too.  All that said, some demonstrator vehicles can be thousands of dollars cheaper than their new counterparts, simply because there’s less demand for older models that have been driven previously. No matter what the dealership’s appraisal price is, know that most cars lose a large percentage of their value as soon as they’re used. 

How much mileage do demo cars usually have?  

A good demo car should only have about 1,000 – 10,000 KM on the odometer. If it has more than that, you may want to rethink your decision until you can confirm everything you can about the car. In fact, vehicle experts say you should try to get $0.25 – $0.50 per kilometer discounted from the price. For a better idea of what a demo car has been through, try running a Vehicle Identification Number (VIN) check to see if it’s been registered by other owners.

Interested In Buying A Demo Car?  

If that’s your goal, it’s important to do a lot of research and understand the potential risks involved. While buying a demo car can be cheaper than a new car right off the bat, you never know what’s happened to it since it was first driven. Check the history, get an inspection and don’t be afraid to walk away if the deal seems too good to be true.                                  

Rating of 5/5 based on 1 vote.

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and traveling the world in search of the coolest sights our planet has to offer. Bryan uses the BMO Cash Back Mastercard to earn cash back on everything from boring bill payments to exciting excursions. He is also a strong saver, holding both a TFSA and an RRSP account in order to prepare for his future while taking full advantage of tax benefits.

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