Friday, September 24, 2010

The Truth about Used Cars

Sharks are out to get your money
So you’re thinking about buying a used car?? We all know that buying a used car is a risky endeavor. It's easy to assume that the car dealerships will have the best quality vehicles out there compared to the smaller lots and private individuals. This is not always true!

I am going to give you a little insight as to what the truth really is from what I have seen over the years. Please realize that some of the things I am going to tell you may not apply to all the car dealerships out there, but it's a good rule of thumb. It is always better to be safe than sorry.

Always remember that buying a new or used vehicle is an "INVESTMENT" so do not invest your money poorly! There are a lot of sharks out there that do not care about you all they care about is your money!

Ever wonder how they get all those cars?
Automotive dealerships gets the majority of their vehicles from two primary sources; auctions and trade in's. The majority of these vehicles come from the auction. Auctions have many different types of vehicles to choose from, all of which are graded on condition. There are several different ways to grade a vehicle (go here for an idea of how it works) but let’s keep it simple.

The higher grade vehicles are considered "lot ready". This basically means the dealer has to do very minimal reconditioning for these vehicles. By reconditioning, I am talking about the initial safety inspection, possibly oil change, maybe fix a few rock chips and vehicle clean up (if they even do any of this). The lower grade vehicles may need more extensive repairs to make them “lot ready”.

What is a program vehicle?
Some of your high grade vehicles are program vehicles which usually have less the 10,000 miles on them. These vehicles typically where used as demo’s by the manufacturer so in most situations they have been well taken care of. One thing to be aware of is that dealers may miss represent some of these vehicles.

I have seen program vehicles that where actually rental cars! I have also heard of vehicles that where bought back by the manufacturer because they were lemons and resold at actions as program cars. So be wary. Always have a vehicle history report done and if possible ask to see a DCS report through the service department (I will explain, keep reading).

What is a fleet Vehicle?
Fleet vehicles make up a large portion of vehicles that may be purchased through an auction. Typically these vehicles will have less than 36,000 miles and be less than 3 years old.

Many of these vehicles where leased to large companies and were used in various ways. When a company leases a vehicle they typically are trying to save money. When it comes to maintenance they typically will do bare minimum and many of these vehicles may not have maintenances done at the proper intervals. Many fleet vehicles were also rental vehicles. Rental vehicles obviously have been driven by a number of different people and most probably have been mistreated.

I have seen were many these fleet vehicles have been in minor (sometimes even major) accidents and there was no mention on the history reports. I do not know how this happens but I can tell you I have seen it on several occasions. It is also not uncommon that these vehicles were not maintained properly. If you are considering one of these vehicles have it checked over good, do not assume anything. We all know what assume stands for don’t we??

Don’t be fooled by appearance
Lower grade vehicles will obviously need more reconditioning. Maybe tires, some body work, new windshield etc. etc. These expenses can add up quickly as you could imagine. The problem is like I said before, the more they spend on that vehicle the less they make. So the idea is to buy the vehicle for as little as possible and put as little money as possible into that vehicle.

The car dealerships take a risk with these lower grade vehicles by spending as little on repairs as possible. They typically will spend more on cosmetics and obvious issues that you can see then on actual repairs. Their thought is that the average person will typically over look a lot of issues if the overall appearance of the vehicle is good. It is amazing what a good detail job can do for any vehicle. So do not be fooled by the appearance of the vehicle, it is not the best way to judge a car.

Cutting corners saves money
True profit for a dealer can all come down to the reconditioning of a vehicle. Let's say the vehicle needs 4 tires; a mid-grade tire for the average vehicle ranges from $80 - $120 each, when you multiple this by four tires it adds up quickly. So of course the sales department will want the cheapest tires possible. Cheap tires can save the sales department from 40%-60% a tire, which gives more room for profit. I have seen were only 2 tires where needed because the other two tires where above their safety specifications. So once again they went the cheaper tires because matching them would cost too much, besides who looks that closely at the tires anyway? Trust me I have seen it many times.

When it comes to maintenance most dealerships feel that it can cost too much. So if it needs any basic maintenance above an oil change they will generally pass on doing them. Yes, the sales managers hate doing maintenance on used cars. It takes away from their profit and they figure once again that the average person will not figure it out until it’s too late.  (** I want to point out if the vehicle has a timing belt and it is due by mileage be very careful because chances are they would not replace it as part of reconditioning. If they say they did, get proof!)

A true story
I worked at a dealer once where they had us do a "dab a lube" on every vehicle that came in for service (pull fluids from the vehicle and compare them with new fluids to show how dirty your fluids are to help upsell extra service work – great selling tool by the way). I had a customer come in that, unknown to me, had just bought a vehicle the week before! They did not tell me of course and I had no idea. When we sat down and looked at the fluids they were really bad. I gave them my sales pitch and they just stared at me, like "WHAT???” I wasn't sure what to say at the moment and then the guy say's to me "We just bought this car last week?? The sales guy told us all the service work had been done?? What the hell!!!" Yeah he was pissed and I was speechless. I just told him that I thought he needed to go have a talk with a sales manager and that is exactly what he did. The sales manager actually came back to me later and ripped me a new one! He told me that I should have made something up?!? I am not sure what he was thinking but I was not going to cover up for the sales department’s lies. So do not let this happen to you because chances are it will be at least a few months later before you realize what these people had found out.

They told me they did a 500 point inspection…
One thing that dealerships will push on you is their safety inspections. They will probably have a sheet with hundreds of inspections on it that are all checked off good (look close to make sure that they are all checked off good!!).

To me these inspection sheets really do not mean a thing. For starters you have no idea who if anyone really checked that vehicle out. For all you know it was the quick lube guy that did it! That piece of paper is only as good as the person that looked that vehicle over (**I hate to say it but I have seen guys look at a vehicle for about as long as it took the oil to drain out and then just check everything as good - I have even seen places that do not use a sheet at all and if you ask for one they give you some BS story or better yet disappear for a while and make up a sheet, who will know the difference anyway??). So unless you know the person that looked the vehicle over, be leery of what that sheet says.

One last thing to look for is that whoever filled out the inspection sheet signed their name at the bottom. It is also a good idea to ask if you can speak to the technician that check the vehicle and ask him a few questions. This will put everyone on the spot and you may get a better feeling talking to the technician about the real condition the vehicle is in, plus you can see who looked it over and they can see you. I also suggest when you ask to talk to the technician that you do it when the salesperson is not there. Go directly to the service department and talk with a service consultant or better yet the service manager and ask them instead.

Don’t judge a book by its cover
Many vehicles that I saw come in for service you could tell right away how people took care of them just be how clean it was, inside especially. People that don’t care (you wouldn’t believe how many people do not care) typically have dirty vehicles on the inside, outside and under the hood. So when you are looking at cars on the lot, do not be fooled by how clean the vehicle looks.

All dealers have their vehicles professionally detailed. I have seen vehicles that were traded in that where very dirty. Clean interiors sell cars and these guys made these cars look incredible. They can even bring the shine back to the paint, even if it might only be temporary. Same goes with the engine compartment. Many people judge the condition of a car by how the engine looks. A good detailer will make that engine look new.

Many people over look things because they are impressed as to how clean a car looks. Don’t be fooled! Remember the old saying "Don't judge a book by its cover"! This holds true with cars to!

A couple of good tricks anyone can use
When it comes to doing maintenance, as we discussed earlier, 9 times out of 10 the dealership just will not do it. Maybe an oil change, they are pretty cheap and the sticker in the window gives the customer something to feel good about.

I always suggest checking all the fluids on a vehicle before you even test drive it. Make sure they are at the proper level and that they do not look to dirty. The older and higher mileage vehicles you need to pay particular attention to. These are the ones that they are less likely to put extra cash for maintenance services.

Take a close look at the battery, is there corrosion? Is the battery the original factory battery and the vehicle over 4 years or old? That battery more likely to fail the older it is. Check the air filter if you know how. If you don't, ask the salesman to do it. The air filter is a good way to judge if they really looked this vehicle over or not. Look at the tire tread and make sure the tires look like they have worn evenly and have good tread depth.

Step back from the vehicle and look at it from different angles and see if it looks straight and that there are no signs of major body damage. This can be spotted by paint on the body that doesn’t quite match from panel to panel. The paint may have runs or even dust or dirty that has dried into the paint. Run you hand along questionable areas, is it smooth or bumpy? Look for waves or ripples in and along the body of the vehicle or panels that don’t line up properly. Look at where the doors, hood and trunk lines up to the body of the vehicle, are they flush? These could all be signs of repaired body damage.

Get on your hands and knees
Yes, I suggest getting on your hands and knees and take a good look underneath the vehicle. Lots of engines may have skid plates so it may be hard to see anything but look anyway, you just might see a drip of oil or maybe even some damage that you would have no idea existed. If you want to make the sale person sweat a little then have a flash light with you.

Another good idea is to ask them to put it up on a rack in the shop so you can really look underneath it good. This may not always be possible at that moment; the shop may be busy and may have no racks available at that time but eventually if they want the sale and you show interest in the vehicle, they will get it up on a rack for you. Like I said do these things even if you’re not sure what you’re looking at. I highly suggest practicing at home with your own vehicle. If you do not know much about cars yourself or do not feel comfortable doing it yourself have someone help teach you or better yet have someone come along with you.

Aged vehicles lose money
Dealerships want to sell their vehicles as fast as possible because the longer they sit on the lot the more it will cost them and take from their profits. I call these vehicles “aged” (** A good tip to figuring out how long a vehicle has been on the lot is to check the oil change sticker in the windshield! The oil is usually changed in the first 3 days the dealership has that vehicle, use this to your advantage when you start to haggle price!!)

You need to be careful of these vehicles. Depending on the size of a dealership most vehicles will sell within 30 days. Anything that has been on the lot over 30 days needs to be looked over very good because it may have issues. Vehicles can also develop issues as they sit for long periods of time.

We call this “lot rot”. Tires get flat spots and dry rot, batteries lose their charge etc. (if you go out to test drive a vehicle and the battery is dead and you decide to buy it, I would make them put a good new battery in it, otherwise you will be putting one in later at your expense.)

Obviously the dealership doesn’t want you to know how long the vehicle has been sitting on the lot, because it may make it a hard sell. Be cautious because there could be a good reason it has not sold. Sometimes the dealership may be more willing to make a deal on one of these vehicles so they can unload the car. So make sure that they know, that you know, it’s aged.

It is like  an added insurance policy
Even if you do check it out yourself (and for those that do not want to get dirty) I highly recommend spending a little extra cash to have the vehicle checked by a reputable third party, once you have found the car that you want.

If you have a technician you trust make arrangements with the dealership so you can have him inspect it for you. Typically you will be charged from $50 - $100 to have this done. This is money well spent. If you do not have a shop you trust try a mobile inspection service (Try AIM (Automobile Inspection Service), or CarChex - or check around your area there will be some local companies). These services offer different inspection packages that will range from $120 and up.

The money you spend on this may seem to be just another added expense but remember what I said about it being an investment? Treat it like one Think of it as an added insurance policy.

The scoop on vehicle history reports
Two great resources at your disposal are vehicle history reports by either CarFax or AutoCheck® Both of these are great services but be aware that they are not fail safe. They are only as good as the information that they have been supplied with, so they may not have all the facts. Read their terms and conditions so that you know what I am telling you is true. I am not saying not to trust them but take them with a grain of salt.

I will give you a good example of a situation that came up for me one time. A customer had purchased a vehicle from another dealership, that same day. The customer brought the vehicle in because it was still under warranty and it had an electrical issue with the lights. So we get the vehicle in and my tech checks it out and finds that there were some wires that ran along the right side fender that had been pinched between some sheet metal. Looking closer we figured out this vehicle has extensive body work done on the whole right side of the vehicle and it was done half assed! This was definitely not a warranty issue. We talked with the customer and of course he thought we were lying because he had a history report from the other dealership and it did not show it had been in an accident. So we showed the customer and after seeing what we saw, he agreed with us. Of course there was no way to know who repaired it or when it had been repaired but it certainly was not on the report.

So if a vehicle is fixed but it was never reported to insurance or whomever, there is no way for it to show up on these reports. So once again, beware!! I do still suggest having a report run; it still has valuable information and there is a good chance that it has all the information you need to make an educated decision on the vehicle in question.

What is a DCS or Warranty report?
Most manufacturers have a warranty report; more commonly referred to as a DCS report (Dealer Communications Report), that they provide to the dealerships service department that does warranty repairs for them. These reports can have different information depending on the manufacturer.

At minimum the service department can input your vehicle identification number (VIN) and see what recalls are on the vehicle or have been done in the past, when the vehicle was originally sold (the in service date) and when the warranty expires or if it has a branded title (salvage title or some other of issue).

Some manufacturers will also provide previous warranty claims and may have in depth details as to the complaints and corrections that where done and even the dates and the location the repairs where preformed at. Typically these reports will even have the previous owner information as to if it were sold retail or to a fleet or rental company. All the manufacturers supply different information. Unfortunately there is no set standard as to what they will show.

Either way it is worth having this information checked so that you know as much as possible about the vehicle you are considering purchasing. You will need to see the service department directly to get this information. Most sales people will shy away from this particular task and may even tell you there is no way to get that information. If the vehicle you are considering is not warrantied thru this dealership you may need to make a call to another dealership that does. Also ask the service advisor if the vehicle has had any history with them. If it was a trade in they may know what type of repairs or services that vehicle has had done in the past at their store. Either way if the vehicle has had lots of warranty work or other repairs done that may raise some red flags.

That’s probably why it was traded in…
Preexisting conditions may not show up during any type of inspection or test drive. This is something that the dealership did not even know about and should not be blamed for. There are several different scenarios that can arise, some of these are; phantom or intermittent issues such as stalling, running rough, hard starts and strange electrical issues; like the radio cutting in and out or lights shutting off. These things may only happen now and again or during certain situations like driving the vehicles for 2 hours or more or maybe on a cold day when temperatures are below say 20 degrees.

These types of issues may be the reason the previous owner traded off this car in the first place. These can be frustrating issues and unfortunately there is no one to blame (except maybe the person that owned the vehicle before you). These are the types of issues that could be covered under an extended warranty if you choose to purchase one. If not you may be paying to have this vehicle fixed after owning it for a short period of time, this is one good reason to buy an extended warranty!

Remember the dealership is not obliged to fix anything for you unless they have a in house warranty that will cover that particular issue (a good dealership may step up and help you out depending on the issue and situation, but there are many that will not! Remember most used vehicles are sold "AS IS"). Remember the DCS report may have clues in it that can help weed out problem vehicles like this.

What exactly does “AS IS” mean to the customer?
When you purchase a used vehicle the majority of them are sold "AS IS". Pay close attention to the Buyer's Guide, which the Federal Trade Commission requires car dealerships to display in the window of every used car offered for sale on the dealerships lot.
The guide gives basic information about the car and includes a warranty section where one of two choices must be checked.

The first is “AS IS” — no warranty.”  If the vehicle is "AS IS" you need to realize as soon as you sign the paperwork and drive off the lot, it's you baby. The dealership does not have to do anything for you if you have any issues with the vehicle. (It’s not like buying a TV where if there is an issue you may have the option to return it). Because of this "AS IS" clause it is all that more important to protect yourself and take every effort to make sure you are purchasing a quality vehicle (Note that every state has different laws that may affect your right's, be sure you know your state laws!!)

If “Warranty” is checked that vehicle may have some type of in house warranty or it may still have some of its original manufacturer’s factory warranty still in effect. Read this over good so you know exactly which applies. If it has an in house warranty on it get a copy of it and read it over well before you sign it. Most of these types of warranties are limited as to what they will cover and typically will be itemized. Most of these in house warranties will just cover the powertrain and the will only be good for a short period of time. Make sure you fully understand exactly how these extra warranties work so if you do have an issue, there are no surprises.

To sum it all up
Protect yourself by educating yourself. Ask questions, lots of questions and LOOK the vehicle over that you are planning to purchase. Inspect the vehicle yourself or spend the extra cash to have it professionally inspected; it will be worth every penny in the long run. Always have a car history report run and check what the DCS report has to say. These reports can help weed out the lemons. Purchasing a used vehicle is a big investment and a big risk; protect yourself and your investment!

If you have any questions or anything to add please e-mail me or leave a comment below. I would love to hear any horror stories that you wish to share. People need to know! My hope is that one day there is no reason to go through all these steps. The only way that will happen is if people wake up and smell the coffee. Eventually the dealerships and manufacturers will get a clue and change their ways.

The Automotive Wise Guy

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