Edmunds Answers



  • karjunkie 03/10/09 10:44 am PST

    There are no hard and fast rules to what constitutes a demo car. Demo models are "new cars" with high mileage. It could be because the sales manager drove it for a few months or perhaps a customer bought it but the financing fell through. In most states the definition of a "used" car is one that has had a title, so both these cases are technically new cars even with hundreds or even thousands of miles on them. A demo is a used car no matter what they call it. If you buy one, use caution. Mileage puts wear and tear on the car and many demos don't get proper maintenance. Ask the dealer for documentation proving the maintenance schedule has been followed. If the car is due for additional maintenance, insist that it be done before you sign. Don't fall for promises of free service later. Any car loses $3,000 in price the instant it is used so if the car is less than six months old deduct that amount from MSRP. If older than six months, instead deduct 20% because that is how much cars depreciate in their first year. For a $30,000 MSRP that means $27,000 if it's less than six months old or $24,000 if older than six months. Then deduct $0.15 per mile. This amount is the absolute maximum you should be willing to pay. If they want more, then it's not a good deal.

  • autobroker2 03/11/09 5:05 pm PST

    The definition of a "new" car is one that has not yet had the title issued to a buyer. There is no real limit to how many miles it can have on it and still be considered "new" for the purposes of financing, registration, etc.

    On the other hand, there are certainly practical considerations when the dealer tries to sell a car with miles on it as "new." If you have a choice of this car with 700 miles on it or the exact same car in a different color with only 12 miles on it, which one is worth more? The answer is that it depends on how much you want this particular car and how much you are willing to pay for it, even with the miles on it.

    In terms of your purchase, it really does not matter whether it was a dealer "demo" (which usually means that one of the managers was driving it) versus a "tester" (which would usually refer to the only car of a certain model that is kept on the lot for test drives until more show up). The fact remains that it is not yet "used" in the sense that it was sold and titled.

    Once a car is "used," the dealer can buy it back after the initial depreciation hit. That means that, depending on the vehicle, the car might have dropped $2,000 in value or $10,000 in value. The dealer pays less for it because it is worth siginifcantly less than a brand new one.

    For the car you are looking at, the dealer still owns it at the original invoice price. It does not matter to him that there are miles on it. His cost for the vehicle has not changed (although a couple of manufacturers do give dealers allowances for demos). Therefore, he still wants to sell it at or above his net cost, which is going to be significantly higher than his cost would be if he had bought the car used.

    The way that dealers usually make up for the miles on a "demo" car is that they sell it for less than one with no miles on it. In these times, however, almost every dealer is selling almost every car at a low price. It is likely that the dealer (or another one down the road) would give you the same deal on a car with no miles as he will with this one.

    At this point, it's up to you if you want this particular car or one with fewer miles. If there is not another one like this one around, you have a choice to make. For most new cars, the dealer should be able to find you one with fewer miles and still give you a great deal. If the dealer refuses to look for another car with fewer miles, try a different dealer.

    Good luck!

  • MrShift@Edmunds 03/11/09 6:53 pm PST

    There's really no standard to determine this and I'm not sure I see the difference between "demo" and "tester". If it was a loaner or an executive car it would have more miles.

    If you are asking if a car with 700 miles on it is worth less than one with 300 miles, my opinion is no, I don't think so, as the difference is so small as to be difficult to put any substantial dollar value on 400 extra miles.


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