So I tend to drive my cars for a long time. The good news is that I don't have to deal with car salespeople very often. The bad news is that I don't get much practice dealing with car salespeople. But I recently had to shop for a used car for my teen who is now driving and wanted to summarize my lessons learned for future reference. If it helps you too, great.
One other thing: language alert. I've said it before, I don't know how a normal human being can discuss the auto industry without a few expletives.
Accept that You are Fighting the Weight of an Old IndustryThe auto industry has been around a long time. Longer than anyone reading this has been alive. And I don't know when it became such a contentious practice to buy a car. Maybe it's been full of bullshit since the beginning, I don't know. But today, the best you can do is say, "It is what it is," and then do what you can to be informed.
Understand What You WantYou could just browse any used car inventory until you find something that makes sense to you, but really you'll be much more efficient by simply listing and prioritizing a few items that are important to you. With any car, features like fuel efficiency, styling, space, comfort, technology, and safety are typical concerns. If you're looking for used, these are additional items to consider:
- Condition - Understand that a used car is likely to have picked up a few scratches even if it's still relatively young
- Miles - The mileage the vehicle has collected is a part of the condition, but is also important in evaluating whether there is any manufacturer warranty left on it
- Age - Years old...just like you use it to judge humans
Use that InternetThe Internet is your best friend when it comes to auto buying. It isn't perfect; sometimes it's a frenemy because the auto industry also uses it and the Internet can't provide full transparency over a shady industry, but it beats the heck out of nothing. And it's a lot more than nothing! You can get expert opinions on any car model, stats on everything from fuel ratings to vehicle weights and tire sizes.
Find What you WantWhen you have decided on what model you would like, the Internet can also help you research what's available in the market. The problem is that there is no one perfect site that can solve all your problems. Not all sites access the same inventory so you'll be hunting across several of them. Here's a list of what I've used along with some comments:
- TrueCar: I wrote about TrueCar before when I bought a new car. It's handy, but has changed a lot over the years and isn't quite as good as it used to be. However, it's still one aggregator that can help you find cars at traditional dealerships. TrueCar also lists a price, but don't take it at face value, in most cases you can still negotiate. TrueCar search results seem to include only larger institutional dealers.
- CarGurus: This is a relatively new site I think, and I kind of like what it had to offer. CarGuru aggregates available listings but it also adds some useful information. It claims it studies listed prices for that model and will give you an indication of whether the deal is good, fair, or overpriced based on what it sees. It also has handy information for negotiations, like how long that car has been listed. Generally speaking, dealerships are not interested in used inventory hanging around for more than a few months. One salesman told me that with their used inventory the prices will gradually drop every few weeks if it isn't sold. I've actually seen this as I was hunting for my latest used car.
- AutoTrader: Another big aggregator. Easy to use, searchable, and sortable, but otherwise unspectacular. I have noticed this site will include independent dealers along with major ones, and also a few private sellers.
- Cars: Another aggregator similar to AutoTrader. Features lots of great searching and filtering options. Results seem to only include dealers.
- Craigslist: You've heard of this site...it's the site where you can buy almost anything direct from a person. The world's biggest garage sale. This is where you want to go if you want to buy direct from a previous owner. But there's some risk; you don't know anything about the car and since there isn't a partnership between Carfax and Craigslist, there isn't a free Carfax link for the vehicle. This site is a throwback to the wild west days of the Internet, back before the days of eBay buyer and seller protection. It'll be up to you to judge the seller when you meet him or her. You can probably find a great deal here and avoid a dealer's dirty tricks, but you could also end up with a car that has problems. For all the crap I give to dealers, at least they generally favor better used cars for their inventory. Guys in the car industry I've spoken with say the total beaters (the worn older cars) from trade-ins are usually sent to auction.
- Ebay: The famous auction site also has cars in a sub site called Ebay Motors. It includes listings from dealers and individuals. It distinguishes itself from other sites by including feedback about buyers and sellers if they have any history with eBay. Buyers also get some purchase protection against fraud if they complete the transaction on eBay. This might actually be as good as what you might get from some dealers, and likely better than what you'd get from a sleazy independent dealer. Texas Direct Auto lists lots of cars on eBay.
- Edmunds: Another aggregator that like CarGurus will also try to rate the quality of the deal. I found this site's performance janky.
- Kelley Blue Book: Since 1926 the Kelley Blue Book has been a resource for vehicle valuation. One of the funniest things that ever happened to me when buying a car was when a salesman asked me where I came up with a price when I made an offer on a car. I mentioned KBB and he acted like he'd never heard of it. It's only been around for a hundred fucking years, dipshit! According to the FAQ on the KBB site, KBB was bought by AutoTrader. So I found it interesting that their sites look so different. KBB, like Edmunds and CarGurus, is a listing aggregator and will try to rate a deal's price. The site also has a valuation feature where you can check what it thinks the value of your car is. One thing I don't like is that KBB's site will detect if you have an ad blocker on and ask you to turn it off.
- CarMax: I mentioned CarMax before in a previous post. They tend to feature good condition used cars and have no-haggle pricing that is ok although you can probably do better elsewhere if you're a good negotiator. They are also one of the better places to sell your car. I noticed their listings do not appear on all the other sites so if you want to review their inventory you probably have to go to their site.
Those are just a few of the sites I have used. There are more, I'm sure, and more to come. The Internet has made it possible to see cars from everywhere although of course you can filter the results to listings closer to your location.
One thing I want to say about the sites that try to rate the quality of a deal is that you can't assume that rating is always correct. Like a lot of high-level statistics, it's sometimes a handy tool when scanning dozens of listings. But a lot of those listings could be off. One of the cars I looked at had an Internet price of $13K, but a sticker of $15K. Depending on what price the dealer put on the listing, there could be some wild swings in the evaluation of the deal. And especially with a used car the price means NOTHING until you get a chance to inspect the car yourself.
A Word about CarfaxMost of the listing aggregator sites mentioned above, and most dealer sites too, will include a link to Carfax so you can see the Carfax vehicle history. This can be useful, but understand that it can also be flawed. Carfax can only show what is logged in the databases that it searches. At best, you'll see everything from when the car originally rolled onto a dealer lot, to every time it was registered with a DMV, every accident it was in, every time it had an oil change, and every time it was put up for sale.
But in my experience not all of that data will be there. Not all maintenance shops record oil changes. It's also possible for a car to have been in a minor accident that wasn't reported. I know this firsthand because I've seen it twice. When I bought a 2007 Nissan Altima from Texas Direct Auto years ago, it had dropped in price quite a bit and I was happy to have it but after living with it for a while I realized it had been in a minor accident. This didn't seem to affect the engine and the car was pretty solid for me mechanically while I owned it, so I don't feel too badly about it. But the Carfax was clean.
You Never KnowThe Carfax shortcomings point to the biggest unknown in used cars. You never know who had it before you. That's the biggest mystery. Was it a nutty teen driver that drove everywhere fast and had several cosmetic scrapes (or worse!) that have since been patched? Was it the cliché about the old grandma that only drove the car gently and on Sundays? Carfax can tell you if it was a former rental, so that helps some but also opens up even more mysteries: how many assholes drove that car when it was a rental? I don't trust former rentals; there's no guarantee that a car with only one owner was well maintained, but a rental is likely driven by dozens of people before it went on sale, and this increases the risk that at least some of the previous drivers didn't take care of the vehicle.
Carfax can tell you something else you may want to consider. Cars from the areas with harsh winters are likely to have been driven on roads where they are exposed to salt. Salt is not a good thing for a car, so look on the Carfax for where that car has been.
More recently, in my search for my teen's car, I found a deal that was too good to be true. A great price on the model and color we wanted, and it was even a recent year edition. When I went to inspect the vehicle, it looked great on the outside. But I'd learned since my experience with the Altima about what to look for. So I took my flashlight with me and started inspecting the wheel wells and underneath the car. I saw signs of overspray and also missing rear bumper cover rivets. It was clear to me the rear bumper cover had been replaced, and you would only do that if you'd been in a crash.
Now, you can buy a car that's been in an accident and you might be fine. On the car I looked at, it really was clean in all other respects, so if the accident was cosmetic only, then it would have been a chance to get a good deal. But again, you never really know, so in the case of my teen, I didn't want to risk that the safety rating was in any way compromised by this unknown.
The Hard Part: Value AssessmentOnce you have found a vehicle you like, it's time to tackle the hard part. You'll have to see the vehicle and then start negotiations with the seller. I'm assuming in this article that the seller is an dealer or institutional seller and not an individual.
Mental PreparationsBefore going to see the vehicle, I'd suggest some mental preparations. Steel yourself against your own human nature and harness your discipline and patience. You may think you are about to deal with jackals that have every advantage against you, but that's only partially true. If you can affirm these positions, you will have some advantages of your own:
- I'm not in a rush to buy a car.
- I'm not going to buy the same day I check the car out
- I'm not going to show any emotion, whether I like the car or not
- There are a million used cars out there, I am not desperate for this one
- I don't care what the dealer paid for this car, I only care about what I am going to pay
- That car isn't getting any younger, the dealer needs to move it more than I need to buy it
Of course, to be able to think the above thoughts, you have to be in a position where you really don't need the car. The old adage about job hunting says that it's easier to get a job when you already have a job. The same is true for cars. It'll be a lot easier to get a deal if you don't need the car.
Is there risk that a nice car will get sold before you decide to buy? Yes, especially if the car is a popular one. But if a fair deal is more important to you than a specific model or color, then that's the risk you take. Even then, the point about there being other used cars out there is true...and there's always going to be more inventory tomorrow.
The InspectionContact the dealer and arrange for a visit. TIP: try to go see the car near closing time for the dealership, like maybe an hour before. I'll explain why later.
You'll want to analyze the vehicle carefully. If you have a friend that's a mechanic, bring him or her along. One of the other sites I found had some interesting advice, and said that when you do your review of the vehicle, show no emotion and say nothing, just be very businesslike and focus on the inspection. The only emotion you should show is some irritation if you see blemishes. Bring a flashlight to help with inspecting dark areas. Here are some of the things I've learned to look for:
- Overspray: this is excess paint that appears in places it's not supposed to be. It's a sign the car has seen damage and needed cosmetic repairs at a minimum, and possibly more. If the Carfax was clean on this vehicle, maybe it was just a minor scrape, but it's a big unknown either way. Look for overspray in wheel wells, the underbody, any of the body panels, and sometimes even a bit on tires; anywhere that the painter may have done a poor job of masking.
- Missing screws, rivets, or clips: As in my story above, retaining parts that are missing are a sign someone had to remove a part. It is possible that a piece just fell off, but pretty unlikely that multiple parts would, and in my story, the rear bumper cover plastic rivets were missing from all four holes where they should have been. That's no coincidence. Sometimes people in the car industry are sloppy and these are the signs they would leave after having to do body work.
- Asymmetrical features: parts on the left and right sides of the vehicle should match. A cover on a taillight should be the same color and material on both sides. Also check things like mud flaps and wheel bolts. If anything's missing it's something to note when you decide if the price is fair or not.
- Tire tread: a used car probably won't have new tires, but you don't want bad ones that are unsafe or that'll have to be replaced shortly after buying.
- The engine compartment should be fairly clean and everything should be intact unless it's more than five years old and then there might be residual chemical deposits or dirt. In most cases, models from institutional sellers are going to be more recent (within five years) unless it happened to be in really great shape.
- Look for signs of a dirt line on the exterior in wheel wells or inside the bumper cover (modern cars mostly have a plastic bumper cover on front and back) or discoloration near the floor of the interior that might indicate flooding.
- Scan the exterior panels carefully and note any scuffs or scratches. Again, you should not expect a pristine body from a car several years old, but you shouldn't pay full value for one that has significant and ugly scars either. And showing the salesperson that you even notice them will let him or her know you're not just some idiot fooling around.
- You should be able to see the brake rotors. Verify they are smooth and don't have deep grooves in them, which might indicate the previous owner didn't take care of them.
- If the car is supposed to have a spare tire, verify it is present, along with any tools that should be there.
- Obviously test drive the vehicle and make sure it feels comfortable to you and has sufficient performance for your needs.
- Verify all the electrical features are operational. Electronics can get pretty complicated on cars today.
- Test the HVAC unit. Especially in Houston, please test the air conditioning! Also, the air coming from the HVAC unit should be odorless and not like mildew.
If you find a couple cars you like, deciding between them can be tough. The relationship between the mileage and age is interesting. You'll find a car that only a year old that has 40K miles on it, and another of the same model that's three years old but has 32K miles on it. The newer one is likely to have updated features but boy someone really drove it hard for that one year. The older one, if it was well maintained by a good owner, might be just as nice a vehicle.
The Negotiation Part 1 - SalesGet something else into your mind before we continue: you don't know what the dealer paid for that car and the salesperson will never tell you. If he does, you must assume it is a lie. And it's ok, because it doesn't matter. As long as you don't feel ripped off when you buy, you'll survive.
Ok, so you finished your test drive and inspection. Is the dealer's price fair based on your research? If you're convinced there's nothing wrong with the car you can buy it. Yes, just buy it. It's ok, if you feel your research was good and the dealership priced it fairly, then go ahead if you need it and be happy and think nothing more of it. Enjoy the car.
But if you're not in a rush, consider saying, "I'll think about it." Car sales guys hate that noncommittal phrase. If you want to see a funny use of that line, go watch the movie True Lies. They hate the phrase because you're wasting their time. They're used to seeing you excited for a vehicle. They're used being able to sit you in their office and then spending the next four hours beating the crap out of you for the fun of it. One of my friends in the industry says that's an old tactic called "wearing you out" and boy does it wear you out. When you say "not interested" now you're the one wearing them out. So walk away.
At this point there area a couple of possibilities.
- First, the salesperson might just let you go. Maybe that car is a popular model and there will be another buyer the next day. In the case of the car I mention above where I thought it had been in a fender bender, someone else indeed bought the car within the next week. Good luck to that buyer, I say, but I had good reasons not to buy.
- In the case of a no-haggle dealer, they'll definitely let you walk. Texas Direct Auto and CarMax are like this. You either like the car and buy at their price, or you don't. End of story. The only way to get a deal here is to wait for a price drop if the car doesn't move.
- Another possibility is that the salesperson will ask you to make an offer, saying something like, "What would it take for you to buy it?" or "I really want to move it, make me an offer." This means that the dealership is open to negotiation. Using your research, offer something a little below what you wanted to pay. Maybe shoot for something on the low end of the KBB range. Don't worry about being a jerk and ripping off the dealer, that won't happen. The dealers are like the house in Vegas, they always win. If they weren't winning they wouldn't be in business. I think it would have to be a rare circumstance of perfect timing and a perfect situation where the dealers would let you rip them off. It's common knowledge that the used car sales are more lucrative for dealers than new cars.
If they flat said no to your offer that's ok too. Don't act disappointed. Just say, "Thanks for your time," and leave. Go get a beer or do something relaxing, and assume that car was not meant for you. You may not know it yet but the story may not be over. You've just left the ball in their court. They know you have an interest but aren't going to pay their Internet price. But the key here is that they know you have an interest.
Now you wait. If that car wasn't meant for you move down your list to the next one. If you really liked that one that got away, relax. There will be more new ones every day. Every day. Keep searching.
If the one you liked didn't sell in the next few days, you may get a call from the dealership. "Hey, if I could get that price to $X, would you buy?" Now it's up to you to decide if his lower price is acceptable. If not, then maybe come up to a price you really wanted to pay. If it is, you can say yes. Either way he'll go talk to the sales manager again, but this time you're not there so your time isn't being wasted. When you get a call back, it won't be for the price $X he asked you about earlier. It'll be for something between $X and the original Internet price. Say no. Just say, "No thanks, but I'll let you know if anything changes," and get off the phone. You'll get another call back and they'll agree to the $X price. At $X, you're probably at least several hundred dollars cheaper than the Internet price but maybe not where you wanted. If $X seems fair to me I'll go ahead and accept, but if you're gutsy you can try to hold out for more. The fact that they called you back means they do indeed want to move that car, and moving it now for the lower price is more enticing to them than waiting for the next guy. And there will be a next guy, just like for you there will be another car if this one doesn't work out.
Woo hoo!You win, dealership loses, right? Wrong. Remember, the dealership is the Vegas house. Those guys always win. This is about you just getting a fairer deal. That's all you can hope for. You will never get a deal where they got it on trade-in at $14K and you clever guy you, you stole it for $13K. That's not going to happen except in rare cases or if you're the world's best negotiator and poker player and you happen to hit them up on a day where the car you want has been sitting on the lot for eight months and the sales guy is going to get fired if he doesn't move it in the next day. Like I said, you'll never really know what they paid for the used car and they'll never tell you. So you can't really accurately assess how well you did with regard to price vs cost. All you have is the market value of the car as declared by NADA, KBB, and all the other sites.
Generally speaking, I believe the Internet prices are typically lower than sticker prices and shouldn't be too far off from the suggested values from those sites in your research. So if your work results in you getting a break on the Internet price, well, you've probably done OK.
It's pretty tough to know exactly how good a deal you got. There are too many unknowns with a used car. Who had it before you? What happened to the car before you got it? Is that car better or worse than the other one you saw that had five thousand more miles on it? In my case, NADA said the car I ultimately paid $11K for was worth $11.7K. Sounds great! But then KBB says the car is worth $10K. Oops. So like I said, don't beat yourself up too much over it. I know that the previous month when the dealership first listed my car, it was about $12,100. So I assume I did OK, because had I offered to buy when it was first listed and at the listed price, they'd have gladly sold it for the $12.1K...the exact same car I got a month later for $11K.
Food for thought though: how do you know some of those valuation sites aren't already in bed with the dealerships?
Another thing: you're not done yet. There's another nasty battle ahead.
Negotiation Part 2 - FinanceOK. You got your car and a break on the price. Depending on how long the sales negotiation took, you might be relieved it's over. But especially with used cars, there's some things you have to be careful of when going to finance, if you finance with the dealer.
You can of course avoid this second battle by bringing your own financing. There's a reason the dealerships get all happy when you say you'll finance with them. They're going to make a commission on the financing. They don't even keep the loan...by the time you walk out of the building at the end of it all, they've already either sold the loan to another bank (if the dealer has his own financing department through which he starts the loan before selling it) or the financing they give you is already from a third party bank.
So if you know the walk-out price for the vehicle plus tax, title, and license, get the loan on your own. You can go to most bank websites and it'll take 60 seconds to get a preliminary estimate of the rate and terms. You can then hand the dealer the payment and not worry much about the financing department. In fact, even if you plan to let the dealer finance you, still check out some loan estimates on the Internet so you can know the neighborhood your monthly payment should be in based on your expected price. This may help you later.
If you do decide to let the dealer help you with financing, you need to be ready because they might try some really dirty tricks on you.
Sleight of HandThey'll first try to get you to think about the monthly payment, and not about the interest rate. This isn't illegal, but it is deceptive. So in an age where car rates are usually between 3 and 4 percent, you'll get stuck with 5 percent or worse. Same as with the salesperson, you keep saying no and make them work for it.
Another really sleazy trick that's not illegal but is again deceptive is that they'll not mention that the total pricing projection happens to include several extra fees that were conveniently not disclosed to you. The most common fee and the biggest one is the extended warranty. More on that later. But they'll also try to roll in gap insurance (which helps pay the loan if you can't for some special circumstances). In my latest purchase, the bastards had a new one for me. It was some total bullshit thing called "key insurance". What the hell is key insurance? I didn't know either. They said it was a few extra dollars a month to provide batteries if the wireless dongle battery wore out, or a replacement key once every five years if something happened to the key. Holy shit. That is some bullshit! If I hadn't kept balking at the financing terms he might have not ever have taken it off. This crap was going to cost me "a few extra dollars a month" for a 60 month term? No thanks.
The way you combat this is to ask the finance agent to show you exactly what is on the contract. There should be only a few required items: the price of the car, state-mandated title and license fees, and taxes. That's it. Anything else is optional and should not be on there without your consent. What they want to do is hope you have focused on just the monthly payment. Then when you agree to it they sign papers and you're locked in, having consented to it all even though they didn't specifically mention that the extra warranties are in there.
Previewing what your monthly payment should have been, is a good way to help you tell if you're being fleeced. In my case I had previewed a 60 month loan and the bank had projected a $160/month price, which I thought was probably ok and something my teen could handle. When I got to the finance guy, he offered that the price would be $225/month and I was like, WHAT THE HELL? So taking the 60 seconds to get that preliminary estimate was real useful in educating me about proper expectations. I had the finance guy tell me exactly what was on there and had him take off the extended warranty and the gap insurance but the price was still $170/month so there was something still fishy going on. I remained irritated and continued to say no to the warranties. He finally tried something else, got to a more reasonable $203/month that included the warranty. I asked him what he did and he admitted he took off the key insurance. Fuck me what a bunch of assholes these car people are. That key insurance is $300 of worthless. I can buy remote batteries at Walmart for $6 and you fucking get two of them, and in all my life I've never had to replace a car key. Fucking assholes!
You Bought an Extended Warranty? Dude, You're the Asshole!All right. So I went with the $203/month. Wait, what? Did I succumb to the scam of an extended warranty? Yes, and extended warranties are controversial so I can understand the reaction. I have purchased extended warranties in the past and they have proven worthless, not because they wouldn't work, but because cars are well built enough now that I never had major mechanical issues, even with that Altima that had been in an accident. But generally, if I get a used car, I'm more open to them because of all the unknowns. They're typically not worth it because you have to have some major stuff go wrong for the coverage after deductible to break even. But it does provide a little peace of mind. And actually I lied. There was one time I did capitalize on a warranty when I bought a digital camera at Best Buy. Something happened and the camera became inoperable a couple months after I bought it, but since I had the upgraded warranty, Best Buy immediately replaced the camera with a new one, no questions asked. Extended warranties are not an efficient way to spend money, I get it, but when you have a lot of unknowns it's not the worst thing you can buy.