By on January 25, 2013

Hi Steve,

First, thanks for the articles about purchasing cars and your perspective on things. I’ve read the entire series on buying a used car, and they contain some useful pieces of information on how to approach things. However, one thing that was left out was how to purchase a used car from a dealership that’s still on warranty.

Here’s my issue:  I’m looking at a used 2011 Volvo C30 R-design with 19k miles that has most options included, that’s located a few hours away at a used car dealership. Being a newer car, it’s still on warranty so I’d imagine there’s no reason to inspect it. Volvo also provides complimentary routine maintenance for a few years anyways. The car is also far enough away so I can’t easily talk to the salesperson or see the vehicle beforehand. Unlike a new car I don’t know what the dealership paid for it so I can’t look at invoice. Also the car isn’t a very popular car, which means that while the price should be lower, it’s harder to find other examples nearby.

Their selling price was for $22,990. They had initially posted it on eBay and while I “won” the auction at $18.6k it didn’t meet the reserve price.

  • I called them up and offered $19k. Told them I was willing to be there to buy it on Sunday.
  • The salesman said the reserve price was $22k.
  • I then countered offered $21k,
  • Then he said he would “talk to his boss.” That “I’ve gotta eat” and that “someone who took a few test drives is looking to buy the car tomorrow.” Which I assume is all bullcrap.

Anyways, tomorrow comes (Saturday) and I never hear back. I call the guy again, and he tells me his boss says “we’ll be losing money on this deal” and that he can’t do anything about it. He doesn’t counter offer, so I politely reply that “well, I was intending to buy a car this weekend. If you change your mind, please let me know. You’ve got my phone number.”

I don’t feel like I really did that good on negotiation. How would you handle this? I’ve read that used cars often are priced with a markup of 25-40% so was my offer fair? I was intending to just buy it with cash if it matters.

I know that’s a lot of text, but if you care to read it and respond, thanks a lot. In any case, thanks for your contributions at TTAC, it’s always nice to get a different perspective.

Steve Says:

You are committing three fatal errors of judgement.

First, whenever you buy used, you are not buying a car so much as acquiring the prior owner’s treatment of that car.

I have seen countless low mileage vehicles at the auctions abused to the absolute edge of kingdom come. If you don’t know how to detect that abuse, then you need to find someone who is able to make that distinction. Hire them.

Past maintenance records always help a bit.  But a more thorough inspection from an experienced set of eyes will be infinitely more helpful; especially given that this was a sport edition that was likely either a lease or a repo. Whoever had it may not have ever given any serious thought towards maintaining it.

Second, you assume that cash deals are more lucrative for the dealer. If only it were so!

A dealership usually makes far more money on a finance deal. At the auto auctions I regularly see plenty of popular vehicles sell right close to retail because the dealer purchasing the vehicle has been given exceptionally lenient terms by the finance company.

Automotive asset backed securities nearly doubled this past year on the sub-prime segment of that market. Why? Because a 20+% annual return these days on a five to six year note is easily worth the risk, so long as you can repackage that loan among thousands of others and sell it in the open market.

A default on a house simply makes you a renter, even if you have limited funds. The downside is limited.

A default on a car can deprive you of mobility, and make you have to eventually take a 12 year old beater of a Buick instead of a 2 year old hot car with an extended warranty.

The people who buy hot hatches usually want to keep them. America is a transient place. As much as I hate to say it,a lot of folks value their financed cars far more than their rented apartments and houses. After all, if they don’t like where they live, they can find plenty of others just like it or better. That’s not the case with a car.

The final error of judgement I’ll leave to Sajeev. All the best!

Sajeev Says:

Wait…there’s a third error here?  And it doesn’t involve the lack of consideration of Panther Love? Oh dear…

Steve pretty much nailed it. That could easily be an abused auction vehicle, hire someone to inspect it for signs of such concerns.  Cash deals work better on craigslist for private party buyers, most dealerships will wait for/prefer the finance buyer if their margins are getting slim. Or non-existent, which is possible in this case. The third? Perhaps they think they can get you for the full “reserve” price. Or perhaps…

…(calling Steve right now)…Hey dude, mmm-hmmm, uh-huh, mmm-hmmm…OH DAMN SON!

Truth: consider a Volvo dealer’s lifetime value of an R-design customer. Consider this in terms of parts and service. Would they prefer to sell this (zero-profit?) car to someone local? Because you’re gonna hand them a check and probably never come back.  But if it goes to one of their established customers, they will see this vehicle again: in the service drive.

So what’s the deal? They aren’t dying to sell this Volvo…yet.  Perhaps they bought it way too high (as a trade-in, to ensure a sale on another Volvo) or perhaps they can find a more valuable customer for a hot commodity, via financing or longer term service.  This is a niche vehicle, and you don’t necessarily get a smokin’ deal on such rides at the factory matching dealership. While this isn’t an ’05-06 Ford GT waiting for a new owner in a blue oval showroom, it kinda actually is!

Chew on that.

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28 Comments on “New Or Used? : The Three Fatal Errors Edition...”


  • avatar
    Mathias

    To me, the remaining error in judgment has to be offering money on a car sight-unseen. Yes I know that’s how ebay works, but ebay is more of a way to advertise cars than to sell them; at least in the $20k neighborhood.

    Keep in mind that this car is kinda special, certainly rare, and very Volvo. It should be sold by a Volvo dealership — yet it sits at an independent used-car operation. That doesn’t make it a bad car, but that means look it over very carefully.

    That b-2-b warranty isn’t worth much if the valvetrain is pitch black because the factory oil is still in there.

    Finally, if you really want it, grab cash and head out there. As a friend of mine says, “the car business is the NOW business.”

    • 0 avatar
      dts187

      I’m with you. Buying a C30 from an independent used dealer just screams terrible idea.

      How about this:

      You obviously like the C30. How about go to a Volvo dealer and get a brand new one (full warranty!) for just 5k more than what you wanted to spend on a new one. You won’t get an R-Design, but it’s mostly just cosmetics. You can always explore some OEM and non-oem styling options down the road.

  • avatar
    kvndoom

    If they are willing to lower the price if you finance, then just finance it and pay off the bank as soon as you get the account number in the mail. Worst case you’ll pay 1 month worth of interest.

    • 0 avatar
      hidrotule2001

      many times finance companies will include early payoff penalties on used cars to discourage this (though certainly not all of them). It’s always good to check the fine print on financing (especially when the financing is set up by the dealer).

  • avatar
    wstarvingteacher

    You don’t mention what you are driving now but to me that’s important. Unless you are in a real beater that is gasping it’s last, you are in the drivers seat here. If you have $21k at your disposal there are batches of cars out there. Start reading and comparing and leave them to eat their volvo when it doesn’t sell for what they want.

  • avatar
    TEXN3

    I’d wait a month or so, that Volvo will still be there and the “boss” will be more willing to deal.

  • avatar
    28-Cars-Later

    Those C series Volvo coupes were never hot sellers and I don’t care what people tell you they don’t hold their value well and aren’t worth much. This lot I’m sure took it on trade for a Teutonic snobmobile for too much and they are stuck with it, because I know of no indy lot outside of a Volvo specialist who would buy one voluntarily… unless of course it were almost free. Volvos of today aren’t the tanks of old, they are much more fragile and all it takes is to get burned on a few late models to be wary of the brand.

    The other parts of the equation to consider are warranty and parts availability. Indy lot will not likely be giving you a warranty, esp since you won’t be back as a service customer as Sajeev points out, so you need to see how long or if the Volvo warranty still applies. The C series coupes I believe are now discontinued, this means at Manheim their value is on average 10 percent less than when they were still in production. Indy lot didn’t take that into consideration during trade, and prob offered say 24K on trade for the E-class/5-series they sold. They then run the Volvo down the block and it prob bids around 20-21 tops. Oops. That car will continue to bleed wholesale value for the next year or two before leveling off. I say let it bleed on their dime, because they will eventually dump it at the auction in the spring at a loss for around 20 or less. Come back in the fall and look for another C70 (maybe a ’10) this time offer 16-17. Granted E-bay isn’t the car auction authority but you’d be surprised how often they are around the true value of something.

    The key to the auction/market is this: its all about the condition of the car at the time is runs through the block. Mileage is generally irrelevant it does little to the floor price, trim packages are generally irrelevant, the exceptions being any convertible and pony cars where the GT or the ZR1 represent a big jump in power/options etc. Type R, Type Q, Type Z they are all just trim packages, might add a grand to the final bid for one over another one. I think from 2005 onward all C series coupes were hardtop convertibles, so the only differences between them will be trim and maybe turbo vs non turbo/sport suspension etc, really not that big of a deal in the grand scheme of things. Good luck.

    • 0 avatar

      From what I understand, he’s looking at the C30. You know, the little two-door with the glass hatch like the old P1800ES? It has been discontinued, but only just this year. I actually liked it, and I’d love to get my hands on a lightly used one someday. Especially the Polestar one.

  • avatar
    danio3834

    Sounds like they aren’t ready to make a deal yet. Don’t put yourself out there too much, there are LOTS of other cars out there, even weird Volvo hatches. Wait for the right deal. Sit on it, they might even call you back when they’re really ready to move it.

  • avatar
    PrincipalDan

    If you really want one you can do much better than you’re doing right now. If you just want speed and a certain level of low NVH, the B&B can suggest dozens of cheaper more reliable cars.

  • avatar
    Kendahl

    You need to have it inspected by a competent independent mechanic with Volvo experience. Even if the car still has a factory warranty, it won’t cover abuse and neglect by the previous owner. No inspection, no sale!

    Have you found out what it’s really worth? Without that information, you can’t tell if the car is overpriced, underpriced or fairly priced. After verifying that it hasn’t been trashed, make them a fair offer. They need to understand that you would rather lose the car than pay too much.

  • avatar
    burgersandbeer

    “America is a transient place. As much as I hate to say it,a lot of folks value their financed cars far more than their rented apartments and houses. After all, if they don’t like where they live, they can find plenty of others just like it or better. That’s not the case with a car.”

    I disagree. Identical copies of cars are mass produced. How can it be harder to find another car than another place to live? Real estate inventory is basically fixed in many crowded parts of the country; there is hardly a guarantee that you’ll find an equivalent or better place if you move. Especially with rentals, where you have short time frame to make it happen if you want to avoid overlapping rent.

    There are other cars out there, especially if you aren’t hell bent on a C30 with specific colors or options. I think the OP handled the negotiation pretty well. The dealer wanted more money than he was willing to pay, so he walked away.

  • avatar
    mnm4ever

    Take your $21k over to your local Mazda dealer and get yourself a Mazdaspeed3. Or head to your Ford dealer and pick up a Focus ST. Or the VW dealer and grab a GTI. There are no shortage of hot hatches available these days and they all outperform the Volvo.

    If you simply MUST have a Volvo C30, wait until your local Volvo dealer has one, or see if they can locate one for you. Or shop private sales only. There isn’t much of a market for those cars, any I have seen have been bargains. But you are right, there are not very many of them around.

    • 0 avatar
      wsn

      +1

      I just don’t see a Volvo being worth the time and risk like this. When you have a $20k+ budget, always buy a brand new car. Personally, I would buy a brand new Camry with that amount.

      • 0 avatar
        mnm4ever

        I agree he should buy a brand new car, but if his interests are for a hot hatch, why would be want a bland-mobile?

        Personally I would rather buy a used Volvo from an independent dealer than a new Camry.

  • avatar
    Waterview

    “America is a transient place. As much as I hate to say it,a lot of folks value their financed cars far more than their rented apartments and houses. After all, if they don’t like where they live, they can find plenty of others just like it or better. That’s not the case with a car.”

    burgersandbeer: unfortunately for those of us in the business of lending money, Steve’s point is deadly accurate. People will absolutely toss you the keys to their house, but will fight you to the death if you try to take their car. If you ask, they’ll always say they can live with their mother/dad/brother/sister/friend, but they MUST HAVE THAT CAR!

    As one said to me once – “I can live in my car, but you can’t drive your house”

    I’m certainly not endorsing it, but its out there.

    • 0 avatar
      wsn

      – As one said to me once – “I can live in my car, but you can’t drive your house”

      I bet that person doesn’t live up here in Canada.

      If I can’t have both, I would buy a house and take bus, or taxi if absolutely needed.

  • avatar
    Lightspeed

    The real answer for $21K is a CPO Lexus IS350.

    • 0 avatar
      burgersandbeer

      The mind boggles at how many options are available for $21k. You could probably also find a CPO G37 or 328i in that price neighborhood.

      I’m not a fan of Volvo, but I think the C30s are pretty cool looking cars. Definitely unique. If that’s what the OP wants, I would hold out for a while and see if another one turns up.

    • 0 avatar
      mnm4ever

      Not if he wants to have any fun driving it…

  • avatar
    burgersandbeer

    Skimming this again, I think it’s for the best that it didn’t work out. The seller is far away and not a great communicator. I also can’t stand the “I gotta eat” nonsense. Some sellers act as if your money is inherited and you are obligated to line their pockets. I work too, and I am more interested in a fair price that fits in my budget, not putting food on a dealer’s table.

    Stay patient, hopefully another one will turn up.

  • avatar
    Polar Bear

    Another fatal error is to buy a used car based on how much you can haggle the seller down.

    Focusing on price alone applies for new cars, which are comparable products. Used cars are unique. Not two are alike. You buy them based on condition. If the condition is good, the used car is worth more. If it has been flooded, abused, badly crashed or never had its oil changed it might not be worth buying at any price.

    If you buy a used car based only on getting it 2.000 down, sight unseen even, you can end up with a discount on a bad car. Your goal should be to find a great condition used car with a service history. If the price is fair (and you have already researched that), buy the car. So what if the seller won’t come down or you pay 10% above that shady other car you looked at. You are going to drive this car for years. Finding and paying for a good one is worth it.

  • avatar
    Polar Bear

    One more thing. I don’t blame the sales guy for making excuses and hanging up.

    When I sell a used car I expect buyers to show up and look at the car before any negotiations. From my experience, people who just call (or worse, just send a text message) starting to haggle before asking a single question about the car, much less inspecting it, are not serious buyers.

    If I am foolish enough to enter negotiations by text message or phone and reach an agreed price, usually the guy doesn’t show up to buy the car. Or if he shows up after negotiating the car down and saying he will take it, he will start haggling all over again when he shows up, wanting an even lower price than the one we agreed. And then, often, it turns out he has no money and no credit and can’t buy it anyway.

    Now hopefully the original poster is an exception, but in my view most of these calling-to-pre-haggle people are a waste of time. If you want to buy a used car, go there, say hello and shake hands with the seller, talk to him and have a good look at the car. After you done that you can discuss price.

    • 0 avatar
      burgersandbeer

      That is annoying behavior. In most cases it isn’t in the buyer’s best interests either, as many cars present well in pictures but are pretty busted in person. If that’s the case, a buyer may have made it difficult to get a fair value for the vehicle’s condition if they already made an offer over the phone.

      I can see testing the waters in certain circumstances though. The OP said the car was a decent distance away. In that case, I can see mentioning price over the phone so you know the trip isn’t a waste of time. Of course, I can also see the seller making excuses and waiting for a local buyer.

      Also, sometimes the asking price is well above perceived market value. Why go through the inconvenience in checking out the car if buyer and seller are hopelessly far apart on price? When I see this I watch the ad and wait for the price to fall before making contact, but if the car is hard enough to find I can see why someone would try to get a better feel for the seller’s bottom line.

      Just as long as the potential buyer doesn’t say “so tell me your lowest price.” I’ve heard that often enough selling items, and it causes an instant blood pressure spike.

      • 0 avatar
        CoreyDL

        I never answer that particular question when selling a car. I would respond with “Why don’t you tell me what you want to pay for it?”

        I’ve never answered a text asking for my lowest price, either.

  • avatar
    krhodes1

    I have to call out Steve on one point – what history is this car going to have, exactly? It has 19K miles on it. That means it has (hopefully) had ONE service, which consisted of an oil change and a few visual inspections, and that is it. So service history on a car that new doesn’t mean much. I do think that when spending $20K+ I would at least go have a good look at the car, and not buying sight unseen. The warranty is going to protect you from major mechanical issues, but not a stinky smokers or dog owners car. Or general didn’t care and the car is beatup inside and out. Negotiating in person also shows you mean business, even if you end up having to make two trips. It’s a few hours, not the other side of the country!

    If this, or any other used car, is THE car you have been looking for, in the spec you wanted, and in the right condition, what’s $1000? Pay it and enjoy the car. As someone said, every used car is unique, and in this case, these cars are very thin on the ground to start with.

    I also find it amusing how many people still think that being a “cash buyer” is somehow a position of strength and thus deserves a deeper discount. The dealership is going to get paid regardless, and they will probably get paid MORE if you arrange financing through them.

    Finally – Dear God people – yes, you can buy a new Camry for the price of one of these Volvos used. Who bloody cares?!?!? Life is too short! I could have bought a PAIR of Camrys for what I paid for my daily driver, I would rather walk than face that every day! For that matter you could buy TWO base model Versas for the price of a used C30 – wheeee!

  • avatar
    Polestar R Design

    First car was an ’80 Ford Courier for $2400-drove the hell out of it and laid it to rest. My second car was for $2700 and was a ’67 Ford Mustang. Loved it, maintained and restored it to look hot for the girls 30 years ago. I still have this car and it is coming up to being fifty in a few. Bottom line is that despite the liability cost of $100/month got insurance, I KNOW all of this time and effort made be a much more resourceful individual today…richer in multiple ways.
    You can have the IPhone or blackberry. I’ll take the $350 IPAD and Starbuck’s Wi-Fi any day for the memories of a good quality, good looking vehicle.


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