Is Buying a Loaner Car a Good Idea?

Written By: Jerry Reynolds | Mar 14, 2024 12:30:00 PM

I have had a lot of people ask me in the past couple of years if buying a loaner car is a good idea. We have seen many dealers recently ramp up their loaner fleets, and there are a number of reasons why.

First, automakers have recalled millions of cars over the past couple of years, and they know to get people in to make those repairs, they must provide them with a loaner, especially if the recall is of a serious nature that can cause bodily harm. The automakers cannot force a dealership to offer loan cars, so they have all come up with ways to entice the dealers to offer loaners.  Most automakers have been aggressive in offering dealers money to offer loan cars or increase their loaner car fleet.

One interesting side effect of loaners that was quickly discovered was it led to sales. Someone brings his or her car in for service or a recall, and a savvy dealer will give him or her a loaner similar to his or her own car, so the customer can experience the new technology, interior refinements, and increased fuel economy. Some dealers even leave sales numbers in the service customer's car, which is easy to do since they have your trade-in in the shop.

Today, many automakers pay a flat fee to the dealerships to place vehicles in loaner status. On top of that, they reimburse the dealerships with a daily fee for every day a customer is in a loaner. Some dealers apply the factory reimbursement and the factory-to-dealer incentive to the car itself to lower their cost and make the loaner cars easier to sell.

Here’s a video I did on this subject a few years ago.


What's New?

As of late, something new I have seen is automakers not only paying the dealers to have loan cars but when they go to sell them, these cars then also qualify for the factory rebates and low rate financing the new cars get. Up until recent times, loaner cars were titled, registered, and thus considered new. Today, most dealers consider their loaner cars to be demos.

Can you save money buying a loaner car?

Usually, the answer is yes, a lot of money. For instance, I have dealers in my network that have offered really large discounts off MSRP on several models of loaner cars, and they cannot come close to that on a brand new car due to the loaner incentives paid. When you are shopping online or in the newspaper, you'll notice many of the best deals out there say "demo" next to the price. Odds are good this is a loaner vehicle, which is fine, but that is why the price looks so attractive.

Any downside to buying a loaner car?

Not really, but consider the mileage, as they can vary greatly. Most loan cars programs require the dealer to leave the vehicle in loaner service for a minimum of 90 days. In that time, some will have 1000 miles on them, others could have 6000 miles. If you have choices, go with the lowest mileage vehicle that fits your needs. You'll want to look a loaner car over carefully, in good light. You are looking for door dings, windshield chips, interior damage, and uneven tire wear. Be sure to ask, too, how the factory warranty is affected since it has mileage and warranty time expired. Car companies do it differently, so make sure you understand how it works.

These days, you can often save thousands on a loaner car versus getting a brand new car just like it. Just be careful.

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