Should you pick a demo car over a new one at the dealership?

For many Canadians, a car is one of the most expensive purchases they’ll ever make, so it’s natural to want to cut costs here and there. One of the most overlooked things you can do to make your next vehicle purchase more affordable – without sacrificing safety or personal needs – is to buy a demo car.

This article will look at the possible benefits and drawbacks of buying a demo car so you can decide whether it’s worth test driving your next car all the way off the lot and into your driveway. 

What is a demo car?

A demo car (or demonstration vehicle) is a general term used to describe a new car that has been lightly used by a dealership for a variety of purposes. For example, they might be driven by a dealership’s employees to get hands-on experience on a new vehicle so that they can better understand the product they’ll be selling.

Demos may also be used for test drives for interested buyers. After about a year or so, these demo cars are then sold — often with low mileage and in like-new condition. While it does have some wear and tear, the vehicle is often regarded as new because it was never officially registered or sold.  

What makes a demo car different from a regular new car?

As you might have guessed, the main different between a demo car and a totally new one is that the demo will have some minimal amount of daily usage, whether for quick test drives off the lot, or light use by employees who are aware that it will eventually be intended for sale.

Since these cars are driven prior to being sold, unlike new cars, there will be some impact on thehe kilometer range on a demo vehicle. The kilometre range varies by dealership but generally, you can expect a range anywhere from as low as 1,000 kilometers up to 10,000. (Anything over 10,000 and you may want to reconsider buying such a well-worn car.)

Another feature demos often have — and which can add to their cost — is that they may be “fully loaded,” meaning that these vehicles may feature lots of add-ons and extra bells and whistles that the average driver might not normally want or need (like tinted windows, a heated steering wheel or real leather seating). That said, these premium features can be nice extras and will be included in the price of the vehicle.

How much money can you save buying a demo car?

The main reason why some people drive home with their test-drive car is the potential savings over an equivalent car purchased new. Reports vary as to the size of the discount when you buy a demo.

Obviously, some savings should be offered to reflect the added kilometers and any wear and tear, as well as to compensate the buyer for not getting a typical “new vehicle”. It may be possible to get as much 15% to 25% discount on the manufacturer’s suggested retail price (MSRP) of the vehicle; elsewhere, dealerships might knock off 1% to 3% of the MSRP for every month the car was driven before it was sold.

Some dealerships will base discounts on the mileage of the vehicle rather than on a percentage of the MSRP, say, $0.25 – $0.55 cents per kilometre driven.

The important thing is to make sure you know exactly what the discount is before you even consider accepting. Mark Whinton, auto repair expert and creator of the Carquestions Youtube channel, notes that discounts are not guaranteed.

“You might save 0 to 3% or sometimes, not much if anything,” he says. “[Dealers] like to claim the demo car has superior maintenance and was lovingly cared for but, in fact, most salespeople are like the average consumer and give it average maintenance and care.”

However, buying a demo car can offer money saving opportunities beyond the initial discount offered.

When you buy a demo, in addition to the sticker price reduction, you don’t pay for freight and pre-delivery inspection,” says Marcelo Andrade, new car sales consultant at Yorkdale Volkswagen. “So right off the bat, you’re saving another $1,600 to $2,000. And because demos are technically new, you’re still eligible for any new car incentives that are in place, like financing, cash incentives, or lower leasing rates.”

Related: How to negotiate the best price for a new car

What’s the warranty like on demo cars?

The warranty that will come with the car varies depending on the dealership, so you should do your research and get in writing just when the warranty starts.

For some cars, the warranty may have started the day the car was driven for the first time, so you may lose out on some coverage (if this is the case, make sure to ask for an additional discount). Some dealers may not start the warranty until the car is officially sold, meaning you’ll get a vehicle with a full manufacturer’s warranty.

Are there drawbacks to buying a demo car?

There are some important potential downsides to buying a demo car that are worth considering:

• You’re technically buying a used car: Even though the car may be considered new, you’re getting a vehicle that has mileage and signs of usage.
• Lack of choice: the variety of demo cars will be very limited, so you likely won’t get your pick of models, colors etc.
• Potentially higher risk: You’ll have to trust that the previous driver took care of the car. If not, there may be issues with the vehicle that are not overtly obvious.

Do you have to alert your insurance company if you buy a demo car?

When buying auto insurance, you would proceed as you would with any car purchase. You need to give your insurance provider the same details as you would with any vehicle, including information about the mileage, year, colour, model and make of the car. You’ll also need the vehicle registration and the car’s VIN number (vehicle identification number).

If you’re in the market for a car and are considering going home with the very vehicle you’re test driving, there are plenty of benefits to doing so. However, just like with any major purchase, make sure you have all the information you need, and proceed with caution.

 “My best tip about a demo car is to forget they named it a ‘demo car’ and treat its evaluation the same way you would as any used car they have,” says Whinton. “When buying a used car, low mileage, good paint and body, and the condition of the interior are king. Look for the lowest mileage car you can find and always get a Carfax report.”

Read next: How to make sure that the car you're buying is not stolen?