Wherever the hollow tubes of the InterWeb may reach, there you will find the argument that “it’s always a better idea to buy a CPO used car than a new one.” The mean transaction price of a new car in the United States is about $29,000. That kind of money will get you a loaded-up Camcord, a discounted LaCrosse, or any number of other mass-market sedans… but can it get you the BMW of your dreams? A friend and former co-worker of mine decided to find out, using his own time and money.
“Is that yours?” Millions of car buyers spend billions of dollars hoping that this statement will be born of admiration rather than pity. When these words come out of a car dealer’s mouth at trade-in time, they can be especially hurtful– even if the salesman is as honest as their spiel is long. That’s the moment when most car buyers finally discover whether or not their automotive “investment” has walked off a cliff and fallen into the financial abyss known as depreciation.
I get a lot of emails from auto enthusiasts. About 60% of what I get comes down to this question.
“Can you get me a high demand vehicle at a disgustingly low price at the auctions?”
The short answer is no. Just as an athlete can’t contradict the laws of physics, I can’t control the free market aspect of a dealer auction. In my world a car is bid on by dozens of professionals until the last man pays the most. If you want a Toyonda or the latest and greatest wheels that are based on yet another ‘”Fast & Furious” ripoff, then you have to pay the premium.
As for unpopular cars, they are a different story.
Tesla released the finalized features and pricing for the Model S sedan this week, with deliveries of the most expensive variants to begin in “mid-2012,” the others to follow by the end of next year. More than a few people who thought they were going to be able to buy a “premium electric sedan” for $50,000 seem miffed by the final pricing. Yes, there will eventually be a $50,000 car (after a $7,500 tax credit). But it won’t have full motor power, leather, nav, or the ability to use fast-charging stations. Tick off all the boxes, and the Model S pushes double the hyped number. But, let’s face it, these guys have to turn a profit and must pay at least as much for parts as the big established car companies, on top of that big expensive battery pack. So does the announced pricing seem reasonable?
The rise of the internet has had myriad effects on everyday life, not the least of which has been its profound impact on consumer behavior. With ever more data being made available online, and with the rise of independent alternative media outlets like TTAC, car buyers in particular are fundamentally changing their relationship to the car buying process. Dealers have been noting for some time that the internet has created better-informed buyers who, armed with more information, are demanding the car they want at the best possible price, wreaking havoc on traditional car dealer tactics like upselling and opaque pricing policies.
But as the eternal dance between supply and demand shifts in favor of consumers, some dealers and OEMs are having a tough time adjusting to the new reality. At the same time, the need to make money off of online consumer education has created some tension for the new breed of consumer-oriented websites. This conflict has now broken out into the open, as the auto transaction data firm TrueCar has found itself locked in a battle with American Honda over the downward pricing pressure created by more widely accessible transaction data. And the outcome of this conflict could have profound impacts on the ever-changing face of the new car market.
Sometimes the stars align. Last week’s article about the “Consumer Watchdog” Elantra fuel-economy press release had ruffled some feathers and aroused my personal curiosity regarding the Elantra’s alleged thirst. And then — wouldn’t you know it — I found myself with a chance to run South and visit a few friends. The time frame was short. Had to be there and back in 36 hours, covering about 435 miles each way. And the nice people at Enterprise were willing to rent me a 2011 Elantra for a two-day stretch at a total of $50.36.
This was my math: (900 miles/23.5 mpg) * $3.18 = $121.78. That would be the cost of running my Town Car. A mythical 40mpg Elantra plugged into the same equation would cost $71.55. Difference of $50.23. Clearly some sort of sign, right? Might as well rent the Hyundai and conduct a highly non-scientific test. Along the way, we’d ask the usual questions: How well does the Elantra hold up in rental service? Is this the class killer some people want it to be, or the mid-packer described in TTAC tests up to this point? Can’t this thing go any faster? What time is lunch?
[Ed: Part one of Steve Lang’s updated used car buying guide ishere, part two is here, and part three is here.]
When it comes to buying a used car there are two basic negotiating mindsets. You can either be fair and decent or unfair and obnoxious. If you seek to chisel and deceive then chances are you will get a bad car. Only the desperate and deceitful are willing to put up with that type of BS.
Want a ‘great’ car? Then realize that many sellers respond extremely well to honesty and decency. Win – win is no sin. So, karma lovers, here’s some tips for negotiating the purchase of a used car by observing the Golden Rule.
[Ed: Part one of Steve Lang’s updated used car buying guide is here, part two is here.]
You can rigorously apply the tests described by previous installments of this series without encountering a single setback. However when it comes to buying a used car it pays to assume one simple salient fact: you don’t know the complete truth. At least not yet.
When it comes to pursuing the deeper truths about a used car an experienced mechanic will inevitably become your greatest ally and advocate. For most consumers finding a knowledgeable mechanic will be the most important step in the used car buying process.
Before we talk about that, I want to be perfectly clear on this point. A used car is guilty until proven innocent. Do not buy one without taking the car for a professional inspection. If the seller doesn’t agree to let you do so you’re done. Period. No exceptions. Ever.
[Editor’s note: Part One of Steve Lang’s updated guide to used car buying can be found here]
Schedule the test drive for a time when there’s no rush. If it’s bad weather, reschedule. Take a little notebook, write a quick check list based on this article, and make notes. When you approach the car’s owner, be friendly, polite and courteous. Do NOT try to “beat them down” to get a better deal. While you have every right to ask direct questions, you have no more right to insult their car than one of their children.
Mark Modica, a former Saturn dealer GM bondholder, has leveraged his financial loss at the hands of the government bailout into a blogging position at the National Legal and Policy Center, a conservative nonprofit that “promotes ethics in public life through research, investigation, education and legal action.” At the NLPC, Modica focuses on what he believes to be corruption surrounding the auto bailout, and has written a series of anti-GM posts that make TTAC look like a Detroit hometown newspaper (TTAC “bias police,” take note). Most recently, Modica has caught the attention of the auto media, including Automobile Magazine and Jalopnik, with a series of posts accusing Chevy dealers of “scamming” taxpayers by claiming the Volt’s $7,500 tax credit and then selling Volts as used cars. TTAC welcomes anyone seeking to cast more light on the bailout, but unfortunately, Modica’s attacks are too focused on making GM look bad and not focused enough on providing relevant information to the American people. Let’s take a look and see why…