From BNET:http://bit.ly/axFn9i

A lot of us don’t like buying used cars. The cliché of the sharpie salesman in his cheap suit looking to make a monkey out of easy marks has just enough truth to scare some of us into buying new. Carsala, a Berkeley, California start-up launched in 2008 with $850,000 in seed money, says it will take the hassle out of it for you. And it has companies like CarMax—which sells used cars at a fixed price—squarely in its sights.

“If you consider haggling with used-car salesmen a nightmare, then Carsala…wants to be your comforting glass of warm milk,” wrote the New York Times.

The start-up was backed by Labrador Ventures, Launch Capital, Band of Angels and some individual investors.

Tyler Elliston is Carsala’s CEO, and he commissioned a perhaps self-serving survey that concludes that consumers can save an average of more than 25 percent off CarMax prices by using his national service.

Carsala’s business model is different than CarMax’s. Carsala contracts with professional negotiators who will, over the phone, negotiate the best possible deal for its customers. Carsala’s fee is 20 percent of the difference between what you paid and the car’s price in the Kelley Blue Book used vehicle guide. Part of what Carsala offers is a research service. The customer can choose a local search (most do) or a national one. If the customer chooses the latter, Carsala goes through four million online listings looking for deals, then starts negotiating.

Haggling may be second nature to the average shopper in the souks of the Arab world, but it is not a well-honed skill for many Americans. “As much as people hate negotiating, it can save you a lot of money,” Elliston said. Carsala claims that on average, it saves customers $4,000 off of Kelley Blue Book suggested retail prices (or 20 to 25 percent on the deal).

Women are believed to dislike buying used cars even more than men, and Elliston said, “We see a slight tilt towards women, but not as much as we had thought we’d see.”

According to Elliston, “The results of the study were profound in that not only could car buyers achieve a better sales price by negotiating with non-CarMax dealers, but they could also save money with simple research and comparison.”

The survey concluded that, with research alone, consumers could save nine percent over CarMax’s fixed prices, and with negotiating added in the savings were 25 percent. It said that CarMax’s prices were just .55 percent lower than Kelley Blue Book.

In fairness, CarMax is an experienced car vendor that has sold two million vehicles and appraised five million. It is Fortune 500 company, and has 100 stores around the country. And there are other considerations besides price. Buyers walk away with a five-day money-back guarantee, a 30-day warranty (60 days in Connecticut) and a vehicle history report. Cars go through what CarMax describes as a 125-point inspection.

George Hoffer, a professor of economics specializing in the auto industry at Virginia Commonwealth University (near CarMax’s homebase in Richmond) says that he once believed the company’s prices were too high, but has since come to differentiate “explicit” and “implicit” prices. CarMax’s explicit prices may be higher, he said, but shopping elsewhere involves implicit costs, such as “having to go to a bunch of dealers and haggling with them.” He said the CarMax service appeals most to two groups: high-income people and women.

Trina Lee, a spokeswoman for CarMax, said she had not reviewed the Carsala survey, but offered a statement. “CarMax is proud to offer a low, no-haggle price on every car,” it said. “Our prices are transparent and clearly marked on every car, both online and on the lot. We offer peace of mind, exceptional value and ease of shopping. …CarMax provides a wealth of information to customers both online and in the store and encourages and assists consumers with making a fully informed car buying decision. Used cars are individually unique, are not a commodity, and as such are nearly impossible to compare to one another.”

Many used car dealers are honest and reputable business people.  However, some are simply manipulative liars.  Consequently, there are few considerations when buying a used car as important as the credibility and reputation of the dealer.

Carsala’s technology accesses millions of listings on a daily basis and our professional negotiators have negotiated hundreds of deals.   We’ve worked with some great dealers, while others have earned well-deserved spots on the Carsala blacklist.  Here are a few stories:

The “Clean” Clunker

You Never Want to See This!

Even if a dealer describes a car as “clean” and the price is right (or lower than “right”), be careful!  Carsala had looked at over 200 cars for a very kind woman in her late 40s.  In order to get her the best price possible, we called close to 20 dealers to negotiate the price.  We always ask the dealer about the condition of the car, look at the car’s vehicle history report, and then arrange a mechanic inspection (if instructed by our client).  In this case, the dealer conveniently omitted any indication that the car he was trying to unload for close to Kelley Blue Book retail value was a total clunker: salvage title, odometer rollback, etc.  Though vehicle history checks aren’t 100% foolproof, they are generally a good indicator of car quality.

On another occasion, a dealer offered Carsala a sweetheart deal (so it seemed).  The problem was he only provided a 16 digit VIN in the listing.  That just might be a red flag (read: sarcasm) given that VINs are 17 digits.  Sure enough, the car had been wrecked.  Minor oversight?  Could be.  You be the judge.

The Botox Beater

1 Owner Looks Good; but Look Deeper

There’s no fountain of youth for used cars, despite what the odometer may say.  We were looking for a Hyundai Sonata for a local school teacher.  One deal stood out – it exactly met the client’s requirements, was a great price, and even had a clean CARFAX report (with 1 owner).  Luckily, Carsala’s technology raised a flag that the CARFAX mileage was notably different than the mileage in the listing itself – 30,000 miles.  Not only was this suspect because of the large difference, but also because the listed mileage was such a round number.  Our professional negotiator asked the dealer for written evidence that the car had 30,000 miles and had not been subject to a rollback.  The dealer subsequently acknowledged that the odometer had a “discrepancy” he couldn’t explain.

The Sleezy Saleman
We were negotiating a deal for a graduate student who was willing drive a long distance “if the deal was right.” So we put Carsala’s technology to work, found a number of good opportunities, and our professional negotiators hit the phones.  The #1 deal was just a steal – perfect car, clean CARFAX, etc.  But something didn’t sit right with the negotiator.  Normally, we get the deal in writing from the dealer after the customer selects a car.  In this case, because of the negotiator’s intuition, we opted to request confirmation in writing before presenting it the customer.  When the negotiator called the dealer back, he was informed that the salesman he’d been communicating with had been fired earlier in the day and there was no way they could honor such a low price from a clearly disgruntled former employee.  Virtually anyone without such extensive experience in the auto space may very well have driven 300 miles to buy a car for an imaginary discount.

Carsala can help you lay all these concerns to rest.  Our technology is world-class; our negotiators are even better.  Or if you are a true do-it-yourselfer and don’t want to turn over the whole process to Carsala, stay tuned for product announcements!