By on July 23, 2012

 

This 2009 BMW 535i has 45,000 miles and looks absolutely drop dead gorgeous. It offers nearly the same acceleration as a 550i, and far more space than the 335i, which is more sought after in the enthusiast world.

To me, if you’re a true keeper, all of this is good news. The better news? It’s a lemon!

Specifically, this late model BMW is a lemon law buyback. It happened back in the first year of its existence, due to BMW’s chronic fuel pump issues when it was first released. The recall has since taken place. The part has been over-engineered and the problem solved and warrantied for the life of the vehicle.

As for the title, it will be branded as a ‘Lemon Law Buyback’ until either the end of the time or the moment it’s exported.

These common 5-series models are not particularly popular in the export market either. So the question now becomes, “What is it worth?” The rough book on this model came down at right around $22,500. With the branded title and the bad history of way back when, it sold for only $17,300 at this morning’s auction.

There were two other vehicles that I ended up finishing in a firm but profit vaporizing second place.

This 2010 Impala LS has the tried and true 3.5 Liter v6 and 28,000 miles. The bidding went all the way down to $9000 and I jumped in at $9100. Once the price hit $10,400, a few hundred below the rough book, that’s where it stood. The auction fee probably put it right around $10,650.

Then there was a 2010 Honda Insight LX, which I still kind of regret not holding on to the bidding. The unpopular hybrid had some dings and small scuffs, but only 9,700 miles and a perfect Carfax history. Rough book was $12,800. I jumped in at $11,000 and walked off at $11,900.

Part of the reason was because we are getting right near the model change and 1 to 2 year old vehicles can take some nasty hits during this time period.

The other issue is the vehicle in question.  Unpopular models can be hard to unload and experience has lead me to be more of  a hedger than perhaps I should be in my daily life. I am more willing to bid up a low cost car than a high cost one due to the fact that it’s easier to finance on the lower end.  There were a whole lot of second place finishes today and I deeply hate the fact that some potential deals slid right by my eyes.

However, the higher end of the used car world can be a tough market. Some folks try to wholesale the inventory and let that be that. But I’m always wanting to retail vehicles like the Impala and the Insight. My overhead is far lower than the new car dealers and I’m still of the persuasion that a good presentation can always beat up a big bowtie or giant H on the front of a building.

We’ll see. In the meantime, if you folks want to enjoy the sweet lemonade of a killer deal, you often have to throw some lemons into the mix. Branded titles and the unpopular ‘retail’ car are just two ingredients I try to throw into my personal recipe.

 

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45 Comments on “Hammer Time: And Now For Something Completely Different…...”


  • avatar
    krhodes1

    Lots of BMWs got lemon-lawed in the first couple years of the twin-turbo six due to the fuel pump issues they had. A friend had one of the VERY first 335i coupes and it stranded him in Italy when it was one week old. That car went through 7(!) fuel pumps in the 18 months he owned it, but #7 has been fine ever since. I also know someone who had a VW Passat lemoned when the coil pack fiasco was happening – it wasn’t that the car was unfixable, just that the dealer couldn’t get the parts and the car was off the road for whatever number of days his state allowed before the lemon law kicked in. He even had a loaner from the dealership – didn’t matter, VW had to buy back the car.

    I also share Stevens opinion of salvage title cars. Nothing to be afraid of as long as the price is right (and the car is fixed correctly). Two of the best cars I have ever had were a wreck repaired 2000 Saab 9-5 and a theft recovery 1991 BMW 318is.

  • avatar
    modelt1918

    I look forward to these articles. I learn a lot. Thanx!

  • avatar
    28-Cars-Later

    Steve how do R-titles and what-not sit with your customers? Do they try to talk you down a bit if they are interested, or do they not even care?

    • 0 avatar
      KalapanaBlack

      No disrespect to Mr. Lang (I admire your information quite a bit!), but if I heard “R-Title” or “Lemon Law” attached to any second hand car with less than a 50% discount, especially one on a dealer lot, I’d go no further. I don’t care how it drives or what badge is on the steering wheel.

      • 0 avatar
        28-Cars-Later

        I feel the same way, but I’m curious what the sheeple do in such a situation.

      • 0 avatar
        Toad

        From what I gather many of Steve’s customers have credit issues that are at least as bad as the title issues these cars have. Getting a car financed is their first, second, and third consideration; title issues are probably far down their list of concerns.

      • 0 avatar
        Steven Lang

        You would think that. But the truth is that dealers more or less reflect their core market.

      • 0 avatar
        Steve65

        @KalapanaBlack

        And that’s exactly why people can score really good deals on these cars sometimes. The branded title depresses the value in a way that has nothing to do with the wheels on the ground.

      • 0 avatar
        burgersandbeer

        In areas where they use road salt, I wouldn’t knowingly buy a vehicle with any accident history, nevermind a salvage title. I simply don’t trust the paint on the repair to hold.

        Also, in most states I don’t think there is anyway of knowing how severe the accident was. A good body shop could probably figure it out, but having both a body shop and a mechanic inspect a potential purchase is overkill. Unless the car is really rare, easier to move on to something with a clean history.

        In addition, who is actually getting the discount on these salvage titles and lemons? It sounds like Steve did well at an auction, but what about the individual purchaser? Looking around craigslist and autotrader in the SF Bay area, people are asking clean condition prices for salvage titles. It’s insane. It could be a good deal if it was a theft recovery with minimal damage and you are sure the car’s next stop after you is the crusher, but I don’t think you have any way of knowing all the details of how the car ended up with the salvage title.

        A car would have to be pretty rare for me to put up with an “r-title.”

  • avatar
    SuperACG

    There was a B5.5 Passat once that was Lemon Lawed because the customer didn’t like the velour seats. Said they were a magnet for hair, and got the car bought back! Must’ve had a good lawyer.

    Also had a very early Touareg bought back because of air suspension. It got an entirely new air suspension and compressor, but it sat on the lot for months, and the customer got it for roughly $10,000 back of book!

  • avatar
    el scotto

    What do insurance companies think of lemon/salvage/rebuilt titles? I’ve only heard myths/stories that insurance companies don’t like them.

    • 0 avatar
      WildcatMatt

      Many mainstream car insurance companies will insure vehicles with a salvage/rebuilt title. Depending on the state and company, you may have to pay for a mechanic to inspect and certify that the vehicle is roadworthy.

      However most won’t sell you “full coverage” (ie, comprehensive and collision). The idea, in theory, is that when the vehicle is totalled, the insurance company has paid out the “actual cash value” of the vehicle and the owner has been indemnified for the loss. Therefore the insurance company won’t pay for the car “twice”.

      Also in the mix is the fact that most computer systems which handle insurance rates aren’t designed to charge a price commensurate with the reduced value of the vehicle. And while in theory this provides an opportunity for the insurance company to gouge the customer, the Department of Insurance wouldn’t look kindly on reports of charging full price but only paying out at 25¢ on the dollar when the claim comes in.

      • 0 avatar
        krhodes1

        How would the insurance company even know? I had full coverage on both cars that I owned with Salvage titles. They certainly never asked. I even got rear-ended in the Saab twice, never a problem.

        The branded title did cancel the “free” warranty replacement of the timing belt at 60K on the Saab. Which didn’t matter, because the amount that the dealer wanted to change the pulleys and tensioner at the same time was so ludicrous that it was cheaper for me to pay my Indie to do the whole job than to have Saab do part of it for “free”.

      • 0 avatar
        WildcatMatt

        @krhodes1

        This would vary from company to company. Some rely strictly on voluntary disclosure by the customer. Some have procedures which require the rep on the phone to ask when a vehicle was added to the policy.

        Given the amount of data sharing that is coming on line from various agencies (CarFax is rapidly becoming the insurance company’s best friend when it comes to obtaining odometer readings for annual mileage ratings) I wouldn’t be surprised to hear that this will be looked up by the insurance company’s computer in the near future.

        In your case, it sounds like your insurance company has decided it’s cheaper for them to just offer the coverage and pay out the loss like usual than to pursue the title status. Or your rep/agent skipped a step in the procedure and since the car wasn’t totalled a second time they never saw the title and never caught it.

  • avatar
    Synchromesh

    A lemon-branded complicated modern German sedan with lots of electronic toys? No, thank you. Of course reasons vary but if it had something like electronics problems in the past it’s very unlikely anyone will ever be able to diagnose it or fix it. I wouldn’t touch that with a 10 foot pole.

    • 0 avatar
      KalapanaBlack

      +1. If it was something American or Japanese, to a certain point, that’s one thing. But a lemon law-ed 5? Good lord…

      And it’s a decent deal, but not a screaming one. $5k doesn’t actually go very far concerning a late model Bimmer with electrical problems, especially when you’re likely going to be dealing with a BMW new car dealer. If it was $10k, that’s another story. But I wouldn’t risk much more than that on it.

      I’m also very surprised to hear this, in general. Surely, as someone else already queried, these things are lot queens. Who is going to pay anywhere near retail for a salvage vehicle or a lemon title?? You might be able to save $5k on that BMW at the auction, but are you really going to get someone on the other end to take a discount less than $3k when they could buy a pristine one with no negative history for not much more? I don’t see there being a great margin in this, especially when the risk of inventorying it for months and months comes into play.

    • 0 avatar
      Astigmatism

      At 49k miles in a three-year-old car, I’m wondering if the car could still be CPO certified with the title defect. When I bought my CPO car a couple of years ago, Acura, Infiniti and Saab dealers all told me that they could certify a single-owned car up to a certain mileage and year cutoff (in the 60k miles, 4 years general ballpark) for an additional $1500 or so, to cover the cost of the inspection and the warranty. If I were confident I could take the car to a dealer and have them fix any issues in the next few years, that might make me feel a lot more inclined to take the deal, and sock away the extra $3500 for possible repairs three years hence.

      • 0 avatar
        KalapanaBlack

        I don’t know for sure, but my (considerable) gut says there’s a 0% chance any company would consider a lemon buyback (and even less so a salvage title) eligible for their CPO program. Maybe less than zero. Why would they take the risk? If, somehow, it did sqeak through, there are probably 50 clauses voiding the warranty as it relates to the lemon buyback problem.

    • 0 avatar
      28-Cars-Later

      “A lemon-branded complicated modern German sedan with lots of electronic toys”

      Really though, shouldn’t they ALL be branded lemons then?

      • 0 avatar
        Synchromesh

        Yes, they should. I just don’t touch German cars in general simply because they’re not well made. The only way to buy one is to have full warranty and dump it before warranty ends. But then you pay for the badge. I don’t care about the badge and prefer to keep my car as long I want, not as long manufacturer guarantees it.

    • 0 avatar
      krhodes1

      The overwhelming majority of 535i and 335i buybacks where because of the fuel pump issues. And in this case, I absolutely cannot blame the original owners – see my buddy getting stranded on the side of the road 7 times in 18 months. But this issue is LONG fixed – there is no reason to think that any of those cars will be any different than any car that did not go through the buy-back process.

      I also think that in many cases, the issue is incompetent dealer mechanics, not the cars themselves. Even a BMW is not a spaceship, they are not THAT complicated that electrical problems should be so difficult to deal with. There is also the issue of knowledge gained over time. Issues that come up in the first couple years of a new platform CAN take some time to figure out. But once they are in the knowledge base of the manufacturer, not a problem any more, and hopefully they update the systems to eliminate them in the first place. BMW switch suppliers and design on that problematic fuel pump, for example.

  • avatar
    twotone

    Can a branded car titles be conventionally financed (bank, credit union, etc.)? Is “buy-here-pay-here” the only option? Will interest rates be higher, negating the branded title cost saving?

  • avatar
    KalapanaBlack

    One more thing… That Impala must only be a good deal in that region, if the dealer auction price is over $10.5k. On the private party market here in the eastern breadbasket, ’09 and ’10 LTZs with all options and the very similarly reliable 3.9 V6 go for barely a couple grand more ($13-14k)… They may have 40k and be ex-rentals (I figure that one probably was a fleet car of some kind… what Impalas aren’t?), but if you’re going for an Impala, you’d have to be prepared for that. And what’s 10k miles and $2 grand when you’re talking about identical cars, nearly the same age, and heated leather dual power seats, sunroof, rear spoiler, “Bose” stereo, steering wheel controls, bigger engine with more power, fog lights, 18″ alloy wheels, and dual climate? The only longevity issue that could come into play may be the displacement-on-demand of the 3.9, but I’m thinking they eliminated that sometime before ’09-’10. And they built fewer versions for longer periods of time with the 3.9… Seems like they switched something up on the 3.5 just about every year it was built between ’04 and ’11.

    • 0 avatar
      el scotto

      I used to live in the Midwest. Dealers would get used sedans driven by a big three executive. Are cars like this worth drooling over or another ride going down the line?

  • avatar
    Secret Hi5

    I’ve been shopping for a “fun” car and noticed that sellers don’t discount much for salvage titles. Of course, these were Asking Prices, so who knows what the cars actually sold for.

    • 0 avatar
      1981.911.SC

      I bought a California Lemon Law buy back Toyota Matrix XRS. The dealer, who I have dealt with before and I believe, said they love to get these vehicles. Often, nothing really wrong, just picky owners, or financially stressed, or….?? In any event, they are (were?) good deals, that they could sell for good deals and still make money on. Typically low mileage, less than a year old. I’m at almost 60K miles 3 years in, only issue has been the radio CD player quit.
      It was REALLY hard to take that leap, but in the end I have a fully optioned car for the price of the base model.
      Under the right circumstances I’d do it again.
      FWIW they had full disclosure of the problems and the repairs, none of the issues for this one were electronic.

  • avatar
    icemilkcoffee

    Electrical gremlins in a late model luxury car…. no thanks!

  • avatar
    gslippy

    I won a lemon law suit on my former 05 Odyssey, but it took the form of a small check written to me, with no admission of responsibility by American Honda.

    When I traded the car a week after winning the case, the only hint of trouble would have been a Carfax report – assuming the dealer reported everything – since the car was never officially labeled as a lemon.

    I pitied the next buyer.

    Honda was exceptionally resistant to my demands for a refund or replacement vehicle, even though the problems began on Day One with it.

  • avatar
    tim850csi

    Back in 2009 I was laid off from my job. Having lived and worked in the city of Boston for a few years I had not owned a car when I was laid off. My new job required me to drive to and from, but without proof of employment (offer letters don’t jive with banks, and I had yet to receive my first pay-stub) finding a lender was difficult.

    My Father was nice enough to loan me up to $6,000 on a car. We looked around and quickly discovered that there were very few cars that could be had for 6,000 bucks. A few Subies all had north of 100k on the clock and while beggars shouldn’t be choosers I wasn’t in the mood for a Civic or Corolla.

    Off to Countryside Motors we went. They have a sterling reputation for rehabilitating cars that had been written off by insurance companies as totaled. I ended up getting a 2003 VW Passat (I am a glutton for punishment what can I say) 2.8V6 with sunroof and upgraded audio for the grand total of 5200 bucks. 5200 for a car with the options I enjoyed and 57,000 on the odometer. Three years later and I have a car with 115,000 on it. I have changed the oil every 5k with Mobil 1 Synthetic, had the timing belt (and all that goes with it) replaced at 90k and the thing still runs very very well.

    It was a calculated risk, but given the reputation of the dealer and my limited budget it has turned out very very well. While I have no doubt there are horror stories regarding purchasing a Salvage title car, with the right dealer and a little research deals are out there.

    I will be retiring the Passat this coming April when I will be ordering a Focus ST.

    • 0 avatar
      gslippy

      Glad to hear a good story about your Passat. My 02 2.8V6 was terrible, although not quite lemon status.

    • 0 avatar
      espressoBMW

      You might be good for another 100k miles! That’s how much (219k, to be exact) I had on my ’00 Passat GLE when I finally got rid of it. Mine was not nearly as problematic as what some people claim. And it was still going strong. No rattles and a smooth ride!

      “German cars in general simply because they’re not well made”: What?

      • 0 avatar
        tim850csi

        My mechanic tells me that I should just put new shocks in the thing and keep driving it. But the AC has stopped working (as of a week ago when it was 100 degrees for three straight days) and it is also going to need to brakes. The car has been paid off for a year and a half and I want something that is a little more fun to drive, hence the ST. But you are correct, the car itself with some upkeep items completed will probably last at least another 70k

        If only it was a manual…(this is my first ever car to be an Automatic, and this includes my 98 Jeep Cherokee which I searched high and low for).

  • avatar
    Gannet

    So far as I know the following is true regarding branded title vehicles:

    Banks and traditional financers will not finance them.

    Many/most insurance companies will not offer comp/collision on them, or may not insure them at all.

    They are not eligible for CPO programs. It wouldn’t surprise me (but I don’t know) if they are not eligible for either OEM or aftermarket warranty coverage.

    They are very hard to sell for the above reasons.

    In my opinion, even if you are a “keeper” buyer, you need to consider the asset value in case you ever need/want to sell. Life is change.

    So given all that, they strike me as poor purchases for the vast majority of people. There’s just not a large enough discount. That said, if you can pay cash and are willing to take the risks, they can be good cars.

  • avatar
    npbheights

    My father bought me a 1999 Cadillac Deville in April 2001 that had about 20,000 miles and a salvage title. It was hit in the front and he repaired it at his body shop and gave it to me. He had about $15,000 into it. The car never gave me any serious problems and I drove it until an unfortunate overheat event in early 2008 at 150K which blew the Northstar’s head gasket. Due to the sketchy nature of a head gasket replacement on that engine, the lack of re-manufactured Northstars, and the $10,000 quote from the dealership for a new engine, I sold the car on craigslist for $1000.00. 130,000 miles out of what people perceived was a $40,000 car for $14,000 was an pretty good deal, I guess.
    I always carried full coverage and never had an insurer even mention the salvage history. It was involved in 2 minor accidents over the time I had it and it was repaired at the dealer both times. I guess if it had been totaled again, they could have tried to argue that it was worth less than book value, but thankfully I never had to deal with that.

  • avatar
    tekdemon

    It may make sense if you’re a dealer but a consumer would have a tougher time getting one of these cars insured fully and I’d hate to own a BMW without full coverage and an extended warranty.

  • avatar
    Volt 230

    Why buy a potential headache?

    • 0 avatar
      gslippy

      The lure of buying a potentially decent car for 30% off is pretty strong.

      I once considered a salvage title minivan with low miles for a significant discount, figuring that any repairs couldn’t possibly overtake the vehicle’s true value.

      I eventually bought a used car with a warranty, and still saved some money over new.

      • 0 avatar
        slance66

        I’d consider it. I’m usually a cash buyer, so financing isn’t an issue. The devil is in the details though. I’d want to have a good understanding of what caused the problem in the title or in the car itself.

        On reason this might appeal now is that used car prices are so damned high relative to new. There are not many bargains out there.

  • avatar
    jeoff

    First year cars that have had to extend the waranties for quality issues are worth a look. They are cheap, have great warranties, and the issues are known and the manufacturer is working hard to save their reps. Got my 2004 questSL in 2004 with 2000 miles for 19K. Nissan had extended the warranty even further than the CPO would have been (helped for getting the gimpy power tailgate fixed under warranty).


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