Seven Ways to Avoid Buying a Used-Car Lemon

When we buy a car, here's what we do:

• Save up for it in advance -- starting when we buy the previous one for cash
• When our current car gets to the point where it's getting unreliable, a pain to fix, and/or costly to repair/maintain, we identify which models we might be interested in
• We check out Consumer Reports to see which of our favorite models have good reliability
• We test drive all of the cars from our list that Consumer Reports likes
• Once we decide on a model we want to buy, I head to the web to do any final research and start the buying process
• While negotiating, I use a variety of tactics to get the best price possible
• When I pick up the car, I make sure they don't try to tack on needless costs
• I pay cash for the car -- and start the savings process all over again
• I drive the car until problems/issues arise (which is usually 7-10 years), and then start the process all over again

Now I know that you can save a good amount by buying used cars, but I'm not mechanically minded and don't want the time, hassle, potential "lemon" problem associated with buying a used car. But I know many of you do buy used and many more would like to. For all of you, Bankrate offers some thoughts on how to avoid buying a used car that's a lemon as follows:

• Get a CarFax report.
• Beware of cars with out-of-state titles.
• If you're looking at a 4-year-old Ford, for example, copy the vehicle identification number and take it to a Ford dealer and ask if they will run the service record through their computer.
• Beware of cars with no records of oil changes and other routine service.
• Look for evidence of major body or paint work.
• Pull up some of the carpeting and look for sediment or signs of mildew.
• Here's an oldie but goodie: Check for excessive wear in the rubber brake pedal pad.

They end with another bit of useful advice:

Lastly, if a deal on a used car seems too good to be true, it probably is. Even in a bad economy, no one is going to give away a car that's worth $6,000 for $3,000.

Ok, all you used car buying experts out there -- anything else to add?

Comments

[Scordo.com]

When buying used (and keeping long term) it's important to consider "total cost of vehicle ownership" - most of the third party web sites (like Consumer Reports, Edmunds, etc.) have this data. Cost of vehicle ownership is basically the total cost the vehicle will require to keep it running over a period of time. So, and this is just an example, a Honda may have a lower used car cost, but a Lexus could have lower cost of vehicle ownership (which is comprised of maintenance cost, fuel costs, parts cost, etc.).

I would also add that you should know a really good mechanic before considering the above used car scheme, even on very reliable vehicles you will need to do basic work like oil changes, tire installs, tire rotation, belt and fluid changes, brake work, exhaust system work, etc.

Otherwise, you gave really good advice! I'm also like you in that I see the logic in buying used but I often buy new and keep it as long as possible (at least ten years).

[Greg. If the seller balks, do not buy]

#1 Rule: Hire your own mechanic to do a thorough inspection of the car.

[Matt H]

I found the tips from Remar Sutton's book, Don't Get Taken Every Time, very helpful. The sections about the Internet demonstrate a slightly hazy understanding of the technology that ends up being overly paranoid, but the rest of the book is very good.

Now a few tips from my personal experience:

Buy a subscription to CarFax for the month that you're seriously looking, and give a friend or spouse the ability to log in. This way, when you're out looking at cars, you can run as many VINs as you want. Dealers will usually provide reports for free, but I don't trust them.

Don't waste any time with a seller who won't give you the VIN over the phone. They're hiding something.

If nothing else, bring a flashlight and a digital camera when you go to look at cars. A digital camera can help you remember things if you're looking at a lot of different cars. Also, when you're dealing with dealerships, get good close-up photos of the tires. If you decide to purchase a car, make it clear that you expect the tires on the car to be the same ones you did the test-drive in. Sometimes, when they're putting the license plates on and scraping off the stickers before they bring it around, they're also switching out the tires with some old ones.

Any time the salesman tells you that his boss has been using this car as his personal vehicle until they sell it (and he'll be sorry to see it go), assume that's a lie. It's the slightly more modern version of "it was driven by an old lady".

I know FMF is real big on paying cash for cars. That's absolutely a worthy goal, but let's assume you aren't there yet. What's the least bad way to finance? Don't even set foot on a dealer's lot without already knowing what car loan terms you can get from a credit union, and how much car you can afford based on that. For a decent used car, 3 years is about as long as you'd want to pay on it. Don't be the sucker who negotiates with the dealership over the monthly payment. There are just too many ways for them to "work the numbers" in their favor.

Never go to dealerships that refuse to negotiate. They're almost always overpriced. I'm looking at you Carmax! Anything worth thousands is inherently negotiable. When you negotiate, your first offer should be borderline insulting. If it doesn't take their breath away, you didn't start low enough. Come up slowly from there. Walk out at least once, and make them chase you to your car, or possibly call you the next day.

Finally, if you have a vehicle you want to get rid of, that should be a separate transaction. Shop your trade around, getting various offers in writing. Sell your old car only AFTER getting a new one, especially if that's your only car. If you don't have the ability to drive away, it's like negotiating with a gun to your head.

[Matt H]

I thought of one more: don't EVER give the dealership a deposit. If they can't do business with you without taking a deposit, others can. If you give them a deposit, you give up all your leverage.

[Greg]

@Never go to dealerships that refuse to negotiate...I'm looking at you Carmax!

Good point! When I sold cars, I loved it when people came from Carmax and Auto Nation. They would say "I came from xxx...they do not haggle, they just give you a price." I would respond with "If you tell me how much, I will give you a straight answer if we can beat it." Almost every time i would sell a car for several hundred $$ less than they said, but one or two thousand $$ more than I was normally pushing them out the door for.

[Matt H]

Greg,

That's a good point too. Definitely smart from the seller's side of the transaction!

From the buyer's perspective, that's a perfect example of the wrong way to negotiate: starting high and moving down. You need to start low and move up.

Also, don't let the dealership control the pace of negotiations. Correct me if I'm wrong Greg, but I think they deliberately delay to break the buyer's will to negotiate. They're there all day anyway, right? Don't just sit in the chair. Pace around, start to wander toward the door, walk all the way back to your car, hustle them!

The dealership's job is to get you to reveal the most you'd pay for a particular car. They have a lot of tactics, and they're quite good at it. Too many buyers forget that their job is to get the dealership to reveal the least they'd take for the car.

[Bill]

Car sales tactics can be very sleazy, but the internet is a good way to help. Research the car you want and WHAT YOU ARE WILLING TO PAY before you get off the computer. If you look at the car and it is less than adverstised but still OK then make a quick adjustment downward in your price. A dealer car will never be better than it is advertised so you will not need to go up in your price (if the car is nicer than advertised your are probably being duped). Know the price, pay the price for the car you researched and leave if steered elsewhere. Most dealers will recognize your homework and spend less time trying to break you down. Treat the purchase as purely business..do not get emotional and things will work out well for you.

I buy used most of the time and I find that knowing what I want to pay and what the car is worth saves hours of time...I spend less than 2 hours for the whole deal (including paperwork) and I come out paying what I expected.

Use eBay, Enterprise rent a car sales (online), Kelly Blue Book (not as good) and NADA for prices. Look at completed sales on eBay and use NADA cautiously since it is printed by the Auto Dealers (and you can't see the wholesale prices they publish for their members).

As a guide: a $15,000 used car will easily have $3000 worth of bargaining room (i.e. the dealer paid under $12,000). Now the dealer will claim that they did tons of work to the car, but the most important thing they do is clean the entire car (engine and all). That costs them about $200 and the cars look awesome when they are done. I have seen $12,000 cars with $4000 worth of markup but they are less common.

Remember dealers go to auctions where the sellers just dump them as a cost of doing business and without knowledge of the condition. The just-traded-in vehicle is largely a myth...most of the cars on any given dealers lot is bought at auction.

Note: auction cars go cheaply because the condition of the car is unknown and buyers have to look quickly as hundreds roll down a line in front of sellers on auction day. 1 car sells in under a minute...probably faster at the bigger auctions. When dealers buy they have to price in problems, but remember if they get a lemon they just bring it back to another auction or on another day and sell it to another dealer. Auctioning a car is very ordinary for dealers and there are many reasons cars come to auction: repossession (cars are usually in need of some care), dealer needs to turn some inventory in to cash, dealer needs to rotate inventory (no rear wheel drive cars over the winter!!!), lease cars at the end of lease, old rental cars, law enforcement seizures, older police cars, ambulances, hearses, fire cars and trucks, dealer goes out of business, returned new cars (it does happen), an others I'm probably just not tinking of.

[Greg]

@Matt and Bill: reading your posts dredged up some memories.

First, know what you are willing to pay. And you do not have to be a nasty human being to negotiate a bargain. The sourest customers I had (the ones that swore I was a %&%^!! to my face) usually walked out with the best deals, although you could never convince them of that.

Dealers do try to control the transaction and waiting is part of the game. I just take a book and a small cooler with some cold drinks and snacks. I am prepared to wait longer than they are. Find you own method and go with it. Also, if you go on a Saturday, the salesman may not be inclined to take all day (losing other sales) to squeeze a few more bucks out of a decent sale.

When I sold (in Texas), we had a fair number of trade ins on the lot. This will vary from state to state. For example, Maryland requires a rigorous inspection and a 30 day warranty. In Texas you could sell cars "as is." Since having a car on the lot costs money, the sooner you move a car, the better. The sales manager loved taking in a trade and selling it on the same day. It was like money in the bank.

Along that line, dealers want to turn over inventory. If you notice a car that has been on the lot over 90 days, you can generally negotiate an even better deal. Also, look for used cars that do not fit in with the dealership. A Geo Metro on a Lexus lot will not move. A Metro on the Lexus lot for 90 days is a sore.

Finally, always remember you can say "No, thank you." and leave, never to return. You never "have to" buy the car.

[Matt H]

Greg, more excellent points. It's great to hear the insider perspective!

Incidentally, I'll second what Greg said about nastiness. You don't have to be nasty to get a good deal. Be firm, but polite. By "firm", I mean keep your eye on the money. Politeness doesn't have to mean giving your adversary whatever he wants. That's a good policy in any business dealing. When firmness and politeness come into conflict--and manipulative people will see that they do--put firmness first.

[Mohan]

When I bought a car for me, I went to the dealer and said "I am here not to make friends but to buy a car!"...Boy...you should have seen the face of the car salesman.
When I bought a car for my wife, I went to a dealer (sales manager) and gave my price and left. I was home when they called and I said I was in different dealer and it's too late. You could hear desperation in the voice. I said you need to do better than what I came for as I am not going to walk out from this dealer. The guys says...We will give you this many oil change free and we will throw in extra stuff in their. I went to the dealer with my "Beer smelling" breath (as I was home drinking not in another dealer) and signed the paper and walked away with the car.

[Frederick Brown]

Some good advice there. I always recommend people bring someone along to the car yard who knows about cars, someone that is knowledgable and can pick a fault. This does not apply to new vehicles of course but when buying second hand cars it is important to be on your toes. There are a lot of shotty dealerships out there and it is important to know what you are buying, take along a friend or associate that knows a bit about cars and do your homework ;)

Regards,
Frederick