A DEMO or Demonstrator Vehicle, is a vehicle that has been used by the dealership for either test drives for customers (showroom car) or a dealership executive driven vehicle. These vehicles attract rebates from the manufacturer and tax benefits for the dealers but must be sold before they attract too many kilometers. That is why they are cheaper than brand new vehicles but do still have warranty.
Is there value in buying a demo over a brand new car?
In most cases, the answer would have to be yes but will you expect more than you get? Usually, I find people expect to get thousands of dollars off a demo vehicle just because it has got a few kilometres on it. I think they actually believe the old saying that the minute you drive the vehicle out of the showroom it devalues by 25%. The reason that saying used to exist was that once upon a time there were quite significant margins in selling new vehicles but sadly for the car salesperson, those days are mostly gone now and often the new car price is miles better than the comparative price of the used vehicle.
So demos have reduced prices based on these factors:
- How popular is the vehicle – if it is popular then the price reduction will not be much. If they need to get rid of it the reduction could be significant.
- How many km’s does the vehicle have – as the vehicle does more km’s there are different rebates from the manufacturer sometimes and there can be greater tax right offs – this means the under 1,000 km vehicle will not have much of a right off.
- Does the manufacturer have an incentive on the vehicle to registered as a demo and is it greater than the normal retail incentive? You are not going to know this but you could ask and really all it will indicate is that it is significantly lower price than the normal selling price new. But it is a factor in pricing.
- Was it put on as a demo because it is a strange colour or a variation that is hard to sell (this is quite often the case)? – If so then you may want to consider your resale price later if that is important to you.
Well, regardless of all of that it is wise when buying a demo to compare what you will get offered for a new one and what the offer is on the demo vehicle, just don’t walk in thinking the demo will be much cheaper. I get many customers who just want a demo because they think it is an across the line huge price difference and it is not.
Is there a downside?
Demos are generally in good order and rarely have had an accident (not always). Probably the only downsides are:
- You get the balance of registration – so you may have to pay registration again soon not long after you take possession.
- You get the balance of warranty – it can be 6 or more months off a three-year warranty which is significant.
- You may have to service it not long after you buy it and pay for that service.
- If it is a strange colour or a model that is not popular you will have a lower resale value later.
- You are not the first owner.
- It is not new!
If Salary Packaging
You can salary package a demo vehicle but you should be aware of the varying budgets you need to allow for sooner than 12 months registration and quicker first service interval. If you don’t your budget will fall short when these come around.
An experienced salary packager should know this and make the allowance. Many salary packagers won’t allow demos for this reason.
So what discount should you expect from a DEMO?
- The under 1,000 km popular car with a manufacturer incentive – $1-3,000 less
- The under 1,000 km not popular car with a manufacturer incentive – $3-5,000 less
- The nearer to 8,000 km popular car with a manufacturer incentive – About $5,000 less
- The nearer to 8,000 km not popular car with manufacturer bonus – $5,000 t0 $8,000 less
There, of course, are lots of variations and factors but these are common ones and the discount is based on the comparison to the new price you could buy it for.
Hope this helps and my associated company and sponsor National Fleet Finance have a good demos for sale and finance page at this link: http://nationalfleetfinance.com.au/demo-sales1/
Shane de Gelder