Buying a used car

On occasion when a salesman on the used car lot called in sick I would be asked to work in used cars. I recall an eye-opening day. A “looky lou” had come to the lot several times to look at one of the cars. He was my “up” – meaning my turn to take a walk-in customer. Finally he made an offer. It was about $4000 under the retail price. My used car sales manager laughed in his face; he wouldn’t even entertain further conversation, or so he pretended. The potential customer came up some more but didn’t care to budge too much. Finally, exasperated, the manager shouted that they had more in the car than was his offer. The customer doubted that … At that point the manager reached into a file and pulled out a pencil scribbled note card showing the take-in price and additions, all totaling about $3000 under the asking price. At this point the customer made an over invoice offer and soon a deal was reached. Later the sales manager divulged to me that the used car markup on our lot was $3000.

The above may seem like a strange way to buy a used car,  but it’s actually very effective.

You could just make an over invoice offer the same as you do with new cars. The problem is that you don’t have a handle on what the invoice and markup are on a used car. The dealer could have made a good buy at a dealer auction and has the car marked up $4000. Or he may have it marked up only $1500. So if you make an over invoice offer that is accepted and thus still be making a good buy, but you could be way off on your guess about the invoice price. Checking the Kelley Blue Book or NADA will certainly be helpful but not as helpful as knowing the invoice price before you agree on a purchase price!

Used cars are truly one of a kind. If marketed and sold right, they can be more profitable to a dealer than selling a new car. It will be harder to buy a used car at $500 over invoice than it is to buy a new car – but you should try. The longer the car has been on the lot, the more willing the sales manager will be to sell it at your price.

Used Car buying rules

Bev’s 1st rule: If you are buying a used car at a dealership: NEVER buy a Dodge off a Ford lot, a Chevrolet at a Toyota lot, a Mitsubishi from a Honda lot. Bells go off in my head. There is a reason that Dodge is on a Ford lot instead of a Dodge lot. You want to buy a used Ford from someone who was so happy he came to the dealership and bought a NEW Ford.

Bev’s 2nd rule: Check out the car’s history. How do you know the car hasn’t been in an accident? Might it have flood damage, or odometer tampering? Maybe the car has been stolen or has a cloned VIN#. You can be 99% certain of its past by checking the car’s history at CARFAX www.carfax.com. Just enter in the VIN number (that number stamped in metal at the bottom below the windshield on the driver’s side) and pay $19.99 for a single used car history, or pay $24.99 for unlimited 30 day history checks. (With the unlimited plan you can also access safety and reliability reports on different models and recalls.) Visit their site to see all they cover and guarantee when you use their service.

Bev’s 3rd rule: Get the car inspected by a trusted mechanic. He should put the car on a lift so he can really check out the underside. Yes, this may cost you $50 or more, but it could save you hundreds to thousands in repairs later by revealing mechanical problems. I watched someone buy a truck for $3500, and the transmission went out the next week.

Our dealer once got an older already classic car on a trade-in. The car was a beauty. However, I learned that the car had overheated at some point and was severely damaged mechanically. It would be a repairing nightmare. Don’t get caught in the trap of looking at how pretty it is on the outside.

Bev’s 4th rule: Check the Kelley Blue Book or NADA or Black Book at CarQuotes so you know the suggested wholesale and retail values for the vehicle.

Here’s how I told one couple to buy the used car they wanted off the lot: After you test drive the car (and have it checked out by your mechanic), let the dealer know how much you Love/Like it. That will have them excited – they think you are going to be a buyer TODAY.

Now, make a really low-ball offer. Let’s say the car is $7000. You have, of course, underdressed for the occasion. While you don’t look penniless, you want to look like you don’t have $7000. Tell the dealer you can swing $3500. He may decide to throw you out and you’ll have to start all over – that’s okay – this isn’t the only car in the country, but what he’ll probably do is laugh in your face. You make a comeback: “You probably have $3000 in it and you’d be making $500 profit.” He will assure you your offer doesn’t even begin to cover his costs. Continue to disbelieve him and ask for proof. Finally in annoyance and frustration he will pull out his invoice and show you. (Used car invoices are not authentic looking like manufacturer invoices done in triplicate, and more easily tampered with, but if you see him pull it from his file, it’s probably accurate.). Now you know what you are dealing with and can make an over invoice offer – preferably not more than $500 - $1000 unless you really have fallen in love with this one of a kind car or it is in premium condition. If it’s been accumulating dust on the lot for awhile, you may be able to buy it for much less. But don’t expect to pay under invoice.

Dealer used cars are either sold AS IS or with a warranty period – often for a short period such as 30 days. I prefer to stay away from “As Is” cars – I always think there must be a reason they won’t guarantee them for at least 30 days and I’ve been right about this too many times.  I’d also want to purchase an extended warranty when buying used if possible. Of course, if you are buying from a private source you don’t have that option, but you can certainly ask them to guarantee the car for a certain period of time (put it in writing), and have it thoroughly checked out by a good mechanic.

Used car tip: Occasionally a used car buyer may have extremely limited funds and simply need transportation. I once purchased a 15-year old car for my son for $1500 that was mechanically sound (but faded pea green in color), well cared for, and it ran another 70,000 miles with almost no repairs. It had been one of those good car years for that model. The dealer did not care to put it on the used car lot because it was too low in value. He would have wholesaled it out at Blue Book value. If you let the sales manager at a dealership know you are interested in such a car if they were willing to sell it to you at a modest profit (like two or three hundred dollars over Blue Book wholesale price), you may be able to make a thrifty purchase.

Negotiate the price of your used car, then add on the additional costs

Once you have negotiated your car price, you will then follow the steps same as new car buyers to determine your on the road price. That is – adding sales tax, registration and license fees, loan, and any other additions you choose.

Tips for buying from private owners

Your best – and worst – used car buys are frequently from private owners. Best is when you find your dream car in A#1 condition at a price halfway between wholesale and retail. Worst is when someone has unloaded a defective or stolen car on you.

My best used car buy from a private owner: I read a classified ad in the auto section of the newspaper. A Chinese student was returning to his homeland in an emergency and couldn’t take the car. The car was advertised to be in premium condition with a price midway between wholesale and retail in the Blue Book. Could it be a setup? On checking it out, the foreign student and his wife lived in student housing on the university campus, were known by neighbors, the father had died, and this son inherited the role of patriarch. The owners had the original purchase agreement and all maintenance work orders. While I did negotiate a price of $300 less than the asking price, it had been a fair price to begin with. The car ran another 150,000 miles – a good value for about $10,000 on the road – under 7 cents per mile. In this case everything checked out about the owner and the car, and it was an excellent buy.

Worst? Don’t get caught in the scams. Scams are proliferating and good people fall for them. One popular one sounds similar to my good buy above: the owner advertises in the newspaper classified that he has moved (to London or some other foreign country), put his car in storage, and now isn’t coming back. He needs someone to buy his car so will sell it really cheap. Goodbye money, goodbye stolen car when you try to register it, goodbye scammer.

Here’s another scam: The thief steals a real VIN# plate, attaches it to a similar (stolen) car. If you do a Carfax search on the VIN, it checks out. But the VIN# on the title is different – and you didn’t catch that – but the Department of Motor Vehicles does.

Another VIN# scam: Thieves clone a VIN# and place the same VIN tag on several stolen vehicles which they then sell in different states. These VIN# can be gotten from parked cars and cars for sale on the Internet.

Hurricane Katrina scam: vehicles which have been totaled out due to flood damage may appear with “laundered” titles in a different state. Be suspicious if the vehicle was registered in a hurricane struck area.

How to protect yourself: Check out VIN# against the VIN# on the title. Beware if a vehicle has had a registration in a different state – since states don’t share information, someone may be trying to do a cover up. If the price is too good to be true, it’s probably a scam.

 

My son was impressed with a Nissan Murano he saw at an auto show. The previous year’s models were selling about $25,000. When one came up on eBay for $13,000 he asked me what was wrong with it. “Stolen” was my first thought. When I clicked on the link, the listing had already been removed by eBay. Fortunately, people who sell cars on eBay regularly are quick to notice these too good to be true deals and turn them in.

Buying on eBay Motors (a vehicle is sold every minute) and Yahoo!Autos is similar to buying from a private owner through local classified ads – be totally vigilant and check out every detail: VIN#, history, title matching VIN, check out the owner, check out the car with a knowledgeable mechanic. You want to check what your desired vehicle has sold for in recent weeks – not what the asking price was. (The eBay sold price is also good information to have to understand current pricing.) Note that most vehicle purchases on eBay Motors are protected up to $20,000.

What about Certified Pre-Owned Cars? (CPO)

Consider this an alternative to new car buying. These are used cars, but they are in great shape – no serious accidents and body work – and have mileage under 100,000. Often these have been short-term lease vehicles. The manufacturer will “refurbish” the vehicle and provide an extended warranty, much like you get with a new car. They may also provide manufacturer purchase or loan incentives. You can expect to pay higher than normal used car prices, but lower than new.

Government vehicle sales

Periodically cities and counties dispose of their aging vehicles at auction. You will find notices of these auctions in the newspaper. Cars and trucks are sold As Is. You can make good buys or get burned at these auctions. We’ve seen some auctions where most of the vehicles sell at low prices, and others where the prices are way higher than a bluebook wholesale price. If you want to check out these auctions, take a mechanic with you.

Online Car Auction Websites

Have you seen the boom in online used car auction web sites?  These sites tell you where seized car auctions are occurring in your area.  Is it really possible to buy nearly new cars at 1970s prices?  The answer is: sometimes.

The US Government doesn’t have the facilities to store these vehicles, as well as other property seized from criminals and felons, so by law it must dispose of the vehicles and property at public auction.

Government seized-property and surplus auctions are held around the United States at various times and locations. Some seized car auctions are held at a specific location at regular intervals, usually every month or sometimes quarterly.

Until recently the ability to buy these cars at rock bottom prices was reserved for car dealers and auction goers in the know. Sources often remained secret so auto dealers were able to buy and resell these cars at substantial profits. Not anymore.

Now anyone can buy at the same low price as the dealers. Even better, some of these auctions have moved online, meaning you can bid from the comfort of your own home. When you are the winning bidder, all you have to do is pick up the car.

Deep car discounts can be obtained by the general public, but you have to be careful and select a car auction site that is reputable. You also want a site that provides adequate data on each vehicle.

How can you tell if an auctioneer or car seller is legit? It's easier than you'd think. Nearly all of the seized cars have a complete identification report and the VIN numbers are always present. You can check the car’s history at www.carfax.com.

If you are interested in pursuing this option, 3 reputable seized car auction web sites are:

* Cheap Car Search.com
* Car-Auction.com
* AuctionsPASS

There is a subscription fee for using their services. Get acquainted with what each has to offer before paying for their service.

If you decide to participate in a seized car auction, remember that it is not uncommon to be the only bidder. Thus you should always begin your bidding as low as possible; you may well be the next person to walk away with a terrific car at a terrific price.