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!

Walk into a new car dealer and your heart is pumping and thumping.  Adrenaline rushes through your body as you see the beautiful car on the showroom floor that has every feature you want and is in your favorite color!  What should you do now???  Turn around, and walk out because you’re about to waste more than $10,000 on a new car – as if it were a 50 cent piece of candy at the corner store when you were 10 years old.  If you don’t have the courage to walk out, then read my Top 10 Reasons To Buy a Used Car to boost your confidence and help you to understand why buying a used is always in your best interests.

1. Car Dealers Are Hurting

• If you haven’t been following the news, car dealers are having a hard time selling new cars. However, cars manufactures can adjust to this change by producing fewer cars. The problem lies in the used car market. People are turning in their leased cars and not buying them back partly because dealers set the buy-back prices too high and partly because people leased more car than they could afford. You can take advantage of this trend by buying a used car at an incredible discount.

2. Certified Pre-Owned Programs

• Imagine this: you buy a two year old used car in perfect condition with 24,000 miles for $10,000 less than a new car and the warranty is extended from 3 years/36,000 miles to 4 years/48,000 miles. Sound too good to be true? It’s not – you just need to read a little more about Certified Pre-Owned cars to understand why they are an amazing deal.

3. Price

• New Cars are expensive and contrary to what a dealer might tell you, they are NOT a good investment. Tax, title, license and depreciation over the first two years on a $25,000 new car will cost you from $10,000 to $15,000. Ouch! When you buy a used car, you avoid steep depreciation and high taxes on an inflated price. Buying the same $25,000 car, but one that is two years old, will cost you about $11,000 less than its new counterpart. Thinking differently, the cost of owning a new car for two years could even buy you a very nice used car!

4. Used Car History Transparency

• Twenty years ago, we had to believe some stranger about the reliability of a used car. Today, services like CARFAX provide us with complete information about a car’s service, accident, or lemon history. We no longer have to worry about a used car’s history!

5. It’s Environmentally Friendly

• A Toyota Prius is a great car to own if you want to save on gas. However, it takes the equivalent of 1,000 gallons of gas to make a new Prius. When you buy a used car, you aren’t putting another car on the road. Instead, you are trading the energy it took to make your old car, with energy it took to make the used car you just purchased.

6. Depreciation

• Cars depreciate the most during their first two years. By my estimate, a typical new car will depreciate about 40% over the first two years. However, don’t take my word for it. Check out Car.com’s great residual value tool and see how much that new car you are considering will depreciate in two years.

7. More for Less

• Are you thinking about buying a Honda Accord, but really want the Acura TL? Maybe a Ford Taurus is on the top of your new car list, but you really want be seen in a Jaguar X-Type? The great news for you is that you get A LOT more car for less money when you choose to buy a used car.  Check it out for yourself with Carsala’s online price quoting tool.

8. Low Insurance Rates

• Insurance rates are partially based on a car’s value and that car’s safety features. When you an equivalent used car, your comprehensive and collision coverage is lower. If you choose to upgrade your car type when you buy used, there may be other insurance discounts for safety features such as a better anti-theft security system, stability control, or VIN etched windows.

9. Used Cars Have Never Been More Reliable

• I’m not saying that every car on the road is reliable. However, modern cars are incredibly reliable and with cheap services like Consumer Reports, we have easy access to information about the reliability of used cars.

10. You Can Use Carsala

• Buying a used car is suddenly easy. Choose the car, model year, features, and colors you prefer and then let Carsala find the car and negotiate the price for you. They will save you up to 25% off of Kelley Blue Book and you still get to inspect and drive the car before deciding to buy it. The car industry is filled with schemes to trick you into paying too much for a car. Carsala is different because what you pay for their service is based on how much you save, not how much you spend like every other car buying service.

Do you think I missed something?  Let me know by leaving a comment!

Top ten lists are great!  They’re funny, entertaining, and take our minds off the daily humdrum.  Here’s an unusual top ten list because it will leave you feeling knowledgeable and empowered if you’re considering walking into a car dealer – the Top Ten Things a Dealer Absolutely Won’t Tell You.

1.       “I buy my inventory for a lot less than you think.”

• Haggling over price has always been difficult, but with the Internet, things have become a lot easier: Car buying sites like CarsDirect.com will tell you a car’s invoice; the web site Edmunds.com even lists the invoice price of options. At last, we can know what dealers really pay for vehicles. Or so we think.  In reality, a practice called “holdback” allows dealers to pay 1% to 3% below invoice for vehicles. Dealers buy cars at the invoice price and after the car is sold, the dealer gets a reimbursement for holding the car in inventory for 90 days. When a dealer sells the car faster than that, part of the holdback payment becomes pure profit, even if the car is sold at invoice price. “You’ll never get holdback money back from a dealer,” says Burke Leon, author of “The Insider’s Guide to Buying a New or Used Car,” but just knowing about it can help when a dealer whines about meeting your price.

2.       “Our lenders aren’t as tough as I make them seem.”

• Car dealers will sometimes do anything to pass the buck regarding pricing and sales. One common trick? Blame everything on the lender. For example, some dealers will say that the leasing company requires deals to be based on the sticker price, says Mark Eskeldson, a consumer advocate who runs the watchdog Web site CarInfo.com. This probably isn’t the case, since lenders can’t control a car’s price. Likewise, some dealers will claim the lender requires an extended warranty. Don’t be fooled, warns the Federal Trade Commission in its online FTC Facts for Consumers report on auto-service contracts, adding that you should contact the lender to check this out yourself.

3.       “State lawmakers are in my back pocket.”

• Since auto dealers deliver huge sums in sales taxes to state coffers, they have powerful local and state lobbies and have succeeded in pushing through a lot of legislation to protect their interests. One of their biggest targets is direct sales over the Internet. Most states’ franchise laws make it illegal to sell cars in a particular state without a bricks-and-mortar dealership there, and the dealer lobby has been particularly effective at suppressing auto makers’ attempts to sell over the Web. In 1998 Ford began a program in which car buyers could choose from used Fords online at no-haggle prices, then complete the purchase at a local dealership. A year later, Texas regulators filed a complaint against Ford for acting as a dealer without a franchisee’s license. Ford sued, claiming that Texas law favors local dealerships, discriminating against interstate commerce. A district judge ruled against it.

4.       “The bait-and-switch is alive and well.”

• You walk onto the car lot set on a certain model, but immediately the dealer starts ticking off all the reasons why that car simply isn’t good enough for you. Before you know it, you’ve signed on for a car that’s bigger, better, and more expensive. When you show up armed with all sorts of information you’ve gotten online, the dealer’s best defense is steering you into unfamiliar territory, says Phil Reed, a car-buying consultant at Edmunds.com. That’s exactly what happened to Christine Kemp, a junior high school teacher who got sucked into leasing a $40,690 Toyota 4Runner Limited, despite researching lower priced models for over a year. The salesperson focused on the better towing capabilities of the more expensive model. The dealer steered Kemp toward the Limited for a test-drive, and talked up its perks (to great effect) even though the four-cylinder base model was strong enough to tow Kemp’s jet skis.

5.        ”I’ll give you a great price – and then lowball your trade-in…”

• If you’re trading in an old car, explains Leon, the dealer’s greatest potential for profit is in giving you a low value on your trade-in. How come? Most people have no idea what their car is worth, and besides, you’re less likely to play hardball on this point when that new car is much more interesting. Leon recommends always settling on a trade-in price before even considering a new or used car. Last year, Reed went undercover as a salesman and then wrote about it for Edmunds.com. One day, he met a man that had gotten $5,000 for his used Chevy Cavalier, but a week later it was on the lot with an asking price of $12,000.

6.        ”…and you won’t know, since the Blue Book favors me.”

• To help prevent a trade-in disaster, some consumers try to learn their old car’s worth by looking at the Kelley Blue Book (KBB), long held as the gold standard for used-car prices. But both Leon and Spinella warn that those numbers aren’t gospel. Here’s why: KBB publishes two different guides, one for dealers, which prints wholesale prices, and one for consumers, which has retail prices (and is therefore of little help in determining what your car is worth to the dealer). Plus, at KBB’s Web site, you can look up trade-in figures that, even for a car in excellent shape, are below the dealer’s lowest figure (the wholesale price). So even if the dealer gives you the best KBB value for a trade-in, there’s a built-in profit if he turns around and sells the car for wholesale.

7.        ”The car you’re buying was totaled last month.”

• The advocacy group Consumers for Auto Reliability and Safety estimates that one in nine used cars sold has hidden damage, including more than a million cars each year that are totaled, rebuilt and often sold as if free of damage. How do some dealers get away with it? Titling laws vary enough from state to state that a totaled car can be “cleansed” of its salvage brand by being retitled in a new state. Such cars are often shuffled around the country through auctions, and while the final dealer may make a legal claim that he didn’t know about any damage, Brown says that it’s a case of see-no-evil. “Dealers know what they’re buying at these auctions,” he says. One common way to check if there has been any major damage to a car is get a car history report from a service like CARFAX or AutoCheck.

8.       “Your loan puts cash in my pocket.”

• Ever wonder why that dealer is so keen on finding you an auto loan, even when you offer cash? When dealers set up loans, they commonly take the rate offered by the lender, then tack up to two percentage points on top. All or part of that so-called dealer markup is given to the dealer. And dealers aren’t required by law to disclose the practice. The National Automobile Dealers Association (NADA), says that dealers are entitled to a markup for arranging financing. “Because dealers buy credit in bulk and provide the retail infrastructure for serving individual customers, they get lower rates than a consumer,” says a NADA spokesman in a written statement. The problem says attorney Aurora Dawn Harris is that they, “pretend that they’re providing you a free service. And sometimes they’re making most of their profit on it.”

9.       “Our ‘new and improved’ customer service is a farce.”

• After years of having the worst of all possible raps, car dealers now insist that they’ve cleaned up their act. In a speech last year, NADA Chairman Harold Wells proudly cited a 1998 Gallup poll showing that 76% of Americans who bought cars were satisfied with their experience. Too bad he left out the rest of the picture. For one, franchised auto dealers still top the Better Business Bureau’s list of businesses receiving the most complaints – by a long shot. In 1999 auto dealers were the source of 17,686 complaints compared with 9,538 complaints for the No. 2 business, computer dealers.

10.   “A lease is a great deal…for me.”

• You may have noticed that many dealers would rather you lease than buy. The reason is simple: Leases generally bring dealerships more profit than sales, even for the exact same car. Why? Well, consumers tend to know less about leasing than buying. So, while 80% of car buyers haggle over the car’s purchase price, only 10% of leasing customers do, according to Spinella. Plus, lease customers tend to choose more expensive cars. So be extra wary if your dealer does whatever possible to steer you into a lease. One common tactic, says Eskeldson, is to give customers an “apples-to-oranges” chart comparing payments on a lease vs. a loan – quoting a low interest rate on the lease and a high one on the sale. Says Eskeldson, “If the consumer doesn’t know how to calculate his own lease payment, he is ripe for a rip-off.”

This list is primarily from an original article written for SmartMoney.  Write a comment and share your own inside information about the things that dealers won’t tell you!