Already, deals on new cars are not as common as a few months ago when carmakers splurged with incentives. Now, the National Automobile Dealers Association (NADA) Used Car Guide predicts that trade-in values on used cars will go all acme on you within the next few weeks.  Said Jonathan Banks, executive automotive analyst at NADA:

“The most advantageous time this year to trade in a used car will be April through May because values will be higher. Last year, used vehicle prices remained high through July because of a new-vehicle shortage stemming from the natural disasters in Japan, which led to a spike in demand for used vehicles. This year, used-vehicle prices will return to a more normal seasonal pattern.”

On the other hand, if you are not eager to sell, don’t. Keep in mind that NADA is the club of automobile dealers, and they want you to buy new even more than sell used. Because of carmageddon, supply of clean cars under five years is low and will remain low for a while.

While attending a preview drive in Charleston, SC, I spied a most unique vehicle parked near a major thoroughfare: a pickup based on a W124 Mercedes-Benz wagon.

Some people still regard the W124 as the best all-around car the company ever made. A quick Internet search will find a few other “Benzaminos,” but this could be the only one based on the W124. Also unlike the others, the intent with this conversion–performed by an independent repair shop that specializes in Mercedes–appears to have been to make the end result look as close to “factory” as possible. No badge on the tailgate, so the powertrain is unclear. If it were a diesel, though, the ad would probably mention this.

A final difference: this one’s currently for sale. $17,000 or best offer takes it.

From the good old days of 2007…

“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.

Here’s how to avoid the freefall.

It simply can’t be stressed enough. Depreciation is the mother of all automotive operating costs. Even if gas soars to four bucks a gallon, depreciation STILL represents the biggest hit to the car owner’s wallet.

To wit: The average cost for a new car in these great United States currently hovers around $30k. After seven to eight years–  still a few years less than the ever-increasing average amount of time American new car buyers hold onto their whips– the car’s owner will be looking at a depreciation rate somewhere between 65 percent and 85 percent.

In other words, come trade-in time, they’re facing an average loss between $19,500 and $25,500. That’s before any considering of the “opportunity cost” (i.e. money lost by NOT investing the cash in a house/money market/alpaca farm). Or inflation.

Bottom line: if you want to avoid depreciation, forget about buying a new car… or even a near-new car.  Yes, a new car offers warranty-related peace of mind and late model vehicles can be purchased as certified pre-owned models. . But it’s an extremely expensive security blanket. A carefully-selected used car may need repairs. But in most cases, repairs of those expenses still cost a lot less than depreciation.

If you’re willing to forgo that new(ish) car smell, figuring-out your buying pattern is the next step. There are two basic buying types: Keepers (keep cars for the long haul) and Traders (trade them in after a few years).

Many Keepers are ready, willing and able to enjoy a vehicle for well over a decade. “Keepers” believe their car should be a cruising companion until the point where the perceived risk of owning it (usually the cash outlay for major repairs) outweighs the fact that ownership itself eventually costs them nothing/virtually nothing.

In the automotive world they are what we call “married.”

The key to being a successful Keeper: marry genuine quality, not reputation. Say what you will about “import bigots” and brand loyalty. The automotive market is a place where perceived reputation translates into dollars and cents.

Toyotas and Hondas routinely receive price premiums– even though many of their products fall far short in value and performance as compared to their peers. By the same token, overlooked or unloved models represent an excellent way to keep the hounds of depreciation at bay.

In most cases, car buyers get more bang for their buck (power, features, etc.), lower up-front costs, and lower depreciation costs simply by buying a used example of a less well known/accepted car. Mitsubishi, Suzuki, Buick– there are plenty of brands that sell excellent products that simply fail to capture the public imagination. The fact that these cars take a huge initial hit on depreciation works entirely in your favor, both buying and selling.

For example, if you’re looking at a midsized commuter, a 2004 Buick Century or 2004 Oldsmobile Bravada, both of which finished first in J.D. Power’s dependability study and received strong ownership ratings, will cost thousands less to purchase than a comparable Camry, Accord or Pilot. Remember: badge snobs must pay for the privilege.

The Trader is a different animal. They are looking at a shorter time horizon than the Keeper. They require a different strategy.

To avoid depreciation, Traders are best off buying a carefully vetted seven to nine-year-old car of their choice. At that point, depreciation has exacted the majority of its revenge.

With due diligence, Traders can get a superb return on their money. The average seven-year-old car kept for two years experiences minimal depreciation (20 percent or so). The average nine-year-old car experiences even less, and so on. It’s a simple but highly effective buying pattern.

And then there is the Sage. The Sage can buy nearly anything and make a buck at it. Yours truly has enjoyed hundreds of vehicles over the last few years– and it’s only taken huge chunks of my free time to do it. Mechanics, auto auctioneers, wholesalers, retailers and hobbyists will always have an edge when it comes to depreciation costs. We know what’s hot, and we know plenty of people who appreciate hotness.

Again, wisdom comes at a cost. Sages don’t pay for depreciation (much), but their insight requires years of hard work, money (mistakes are never free) and a feel for the auto biz’ cycles of fashion and fame.

Whether you’re a Keeper, Trader or Sage, remember: a car is an expense. It may excite you or be a daily nuisance, but it is still an expense. By minimizing depreciation you will avoid the single largest cost in the process. With that money you can save the world, buy groceries or save up for your next car.

New car sales in the U.S. had crashed from more than 17 million a year to below 10 million. It did not faze you. You buy used anyway. Let someone else eat the depreciation. Now the slump is catching up with you, and you will pay through your nose.  

Reports the Milwaukee Wisconsin Journal Sentinel:

“Prices of late-model used cars have soared as the impact of auto production dropping by millions of vehicles has made its way into the pre-owned vehicle market.”

Late model 2009 and later used cars are in short supply, because fewer were sold and fewer are traded in. If you said “what recession?” and recklessly bought new while the sky was falling, then you are now rewarded with a lot of money. Jesse Toprak of TrueCar.com explains:

“If you are actually trying to trade in a vehicle and get a new vehicle or simply get rid of what you have, you’re going to get some of the highest resale values we have seen in the last several years. Now, if you’re simply in need of a new vehicle that’s used, then you’re probably going to pay more than you would have just a few years ago.”

Joe Spina, senior analyst at Edmunds.com says that the average retail price for a three-year old car as of December 2008 was $13,849. By December 2011, that average retail price had jumped to $19,500.

This will probably go on for a while. Toprak predicts:

“It’s not really going to get any better for the next two to three years.”

So what should you do? Toprak of Truecar tells you to buy new:

“If you look at the purchase from a cost of ownership perspective and not just the purchase price, and if you add in the cost of financing the vehicle, sometimes new cars can actually be even cheaper propositions than a newer used car.“

Bruce Belzowski, assistant research scientist at the University of Michigan Transportation Research Institute in Ann Arbor recommends to buy older:

“If you are willing to go back to ’07 or ’08, there should be a lot of those.”

Even then, the prices will probably be up.

When friends and colleagues ask our counsel on whether or not to buy an older V12 BMW (it happened more than once) the standard answer is always an emphatic “no”. Most people cannot handle the idea of two ECUs (for twice the complexity and repair bills), and for the average Joe looking for a prestigious ride on the cheap (an oxymoron if there ever was one), a V12 BMW is bankruptcy on four wheels.

But when an ad for a car proudly touts the ability to withstand “.357 MAG., 9MM AND .44 MAGNUM AND EQUIVALENT HANDGUN AND LIGHT SUBMACHINE GUN BALLISTICS“, suddenly it becomes very hard to ignore.

Towards the turn of the millenium, BMW offered its own factory armored 7-Series, known as the Protection series. Built between 2000 and 2001, most of them appear to be the big V12 variety but a V8-powered 740i variant was also offered. Now, Bring A Trailer is bringing you the chance to own your very own armored 7-Series, after digging up this Craigslist ad out of Houston, Texas.

In armored car parlance, the ability to stop this level of small arms fire is known as “B4″ protection. A car like the 750iL protection is mainly meant to protect against violent crime like robberies and car jackings. At the time of production, this was conceivably what most private citizens in dangerous locales would need. Nowadays, armored cars are more ubiquitous in dangerous locales, but so is the level of firepower and the severity of incidents. Mexican criminal elements (among other actors) now have access to military grade assault weapons, not to mention grenades and other weapons, and a B4 vehicle could be woefully inadequate. BMW offers a current model 760iL that can stop multiple rounds from an AK-47 or M4 type rifle – a sign of just how far things have come.

According to the ad, the 750iL comes with heated front and rear seats, a nav system, park distance control and of course, special wheels for the run-flat tires. The windows look suitably thick, a morbid reminder of just what this car is built for. At $36,500, the car is on the high side for a 12 year old BMW 7-Series, but the vendor is also willing to trade for a boat or an RV.

What would be your ideal car? Would you like to have the best of the best? A car that offers all the power and luxury an enthusiast could ever desire?

Or are your tastes a bit simpler? An amply powered but safe utility vehicle that will let you do all your work without a hint of regret about scratches or four figured maintenance bills.

This ‘ideal car’ question yields a thousand shades of gray in practice. Take this Mazda MX-5 for instance.

Rent: I know that renting a 2nd gen Miata could be like blindly pressing buttons on Jack Kevorkian’s death machine. Abuse is rampant with rentals.

But maybe not. This generation MX-5 is as tough as nails and if you find the right customers who would pay… say $59 a day…  you may have a profitable undertaking.

Of course you would have to find ‘responsible’ customers. That’s the hard part. If you lived in a tourist community for the well-to-do it could work. Maine, Cape Cod, rural Montana. There are plenty of folks who would be happy to rent a nice convertible for a long weekend and pay well for the privilege. But those people aren’t typically found in Paulding County, Georgia. So renting won’t do.

Lease: On the lower end of automotive retail ($5000 or less) you try to get at least 25% of the purchase price as the down payment. That would make this Miata a $1000 down vehicle. Payments would be anywhere from $65 to $75 a week for 24 to 30 months.

That sounds like a lot. Until you realize that you’re giving someone who already cost a business thousands of dollars your car. At a $1000 down payment I am underwater by three grand. If the customer doesn’t pay, rags the vehicle out, gets into an accident without full coverage insurance, or just absconds with it… I’m screwed.

There is a lot of risk in this business. About a third of buy-here-pay-here don’t work out. Although I have an 85% success rate (which is outstanding), I can and have just as easily lost my keyster on a vehicle I finance.

The only guarantee you have as a dealer who ‘totes the note’ is risk. So you need to make sure your financial return can make up for it.

Sell: There are other risks associated with a convertible in particular. Can you sell it? A Miata is one of the more popular vehicles in the used car market. But given that we’re headed towards winter time, retailing this car may not be an easy thing.

I would likely sell it for around $5995. I bought a clean car at average wholesale. So if I’m a little price aggressive I will likely sell the car that much quicker. At 120k and the touring package I’m sure this Miata would be on the short list for a lot of buyers

Keep: What? Who me? If I were not in this business I would consider it. Every family deserves at least one fun little two seater so that the husband or wife can get away from the hassles of daily life.

So would a Miata be more fun than say.. my 2001 Honda Insight?   

Yes. It would. I am a frugal fellow. But I also like to have my (Indian) pennies rapidly appreciate and raid the clearance rack of the nearby organic supermarket if I can get away with it. A Miata yields half the mileage of the Insight around town. The return though can come through the winding one lane roads of the Georgia mountains. I do a lot of driving.

It’s hard to beat a car that offers the pure, simple fun of a Miata. So…

Should I start a rental program for the well-to-do?

Finance the vehicle to a soul seeking hedonistic fun and creditworthy redemption?

Sell the vehicle in a mano-a-mano battle against father time and cold weather?

Or keep it and reward myself for buying the right car in a tough market?

What says you?

(NOTE: Please avoid the ‘name’ semantics of this article. I know that the manufacturer calls it an MX-5 while certain enthusiasts still call it a Miata. I prefer Miata. Why? I love the Miata name and wish Mazda hadn’t acronym-ed and numericded themselves into anonymity. Great cars with limited dealer networks need names.)

This market has ceased to make sense. 

$7300 (plus auction fee) for a 2003 Honda Accord EX coupe with 220k and a bad rear bumper.

$8800 (plus auction fee) for a 2003 Chevy Tahoe with 102k and scrapes along the side.

$23,800 (plus auction fee) for a 2003 Corvette Z06 with 16k and some really crappy plastic add-on’s.

Keep in mind that last price was well over two grand higher than on Ebay. Same miles. No Wal-Mart quality chrome add-on’s. No interior detail needed.

What the hell has happened to the car market?

Well I’ll tell you. The first two sold to a Middle East exporter who will no doubt roll back the miles in their time honored tradition. A lot of salvage cars also head over there (the United Arab Emirates in particular) where thousands of immigrants spend their days using the finest hammers and blunt tools to bend these vehicles back into shape.

I once saw a neat video about how all this is done. Courtesy of a million plus vehicle a year salvage auction company. The video highlighted dozens of East Asians and Africans pounding out old metal and switching out the electrics. Parts would already be put in the shipping containers along with the carcass of a vehicle and sent to rebuilders a half world away.

It was interesting. Especially to the auction’s investors. Junk cars do make money and do employ an awful lot of people the world over.  However getting that video for public consumption in North America was somewhere between verboten and fugheedaboutit! I never managed to get that video for TTAC.

I don’t know who bought the Corvette. The dealer may have already had a member of the general public wanting to buy the car for him, which is as common as kudzu these days.

At this particular sale I always see non-dealers walking around the cars. Dealer sales are in name only these days. Nearly everyone buys vehicles for the public. However this is the only sale I’ve been at where the public is literally swarming around the vehicles before the sale. As a guy who has to spend $10k+ every year as a dealer for the right to sell ‘cars’ of all things… I don’t see why we even bother with dealer licenses.

This business is not rocket science in theory. But it IS challenging in practice. The ‘education’ comes from losing money on cars you should have never bought in the first place. Most members of the public are clueless when it comes to these things, and when I see a piece of junk sold at the public auctions, it’s often times an individual with no experience bidding on it.

I believe in free markets though. At least when it comes to buying cars. So you want to buy at an auction? Go for it. 

Just remember that auto auctions are a lot like Wall Street. You will always be the last one to know when you have bought the wrong thing.

Panther lovers will be sad to hear that this, the last of the black-and-white Crown Vic Interceptors, has gone down the line according to the Ford St Thomas Assembly Plant’s Facebook page. The last Panther (reportedly a Town Car) is scheduled to be built on Monday, and the plant’s “about 1,500″ workers will be laid off on the 12th of September. If you know someone who loves the Panther chassis, please be sensitive to their needs in this difficult time. Remind them that there’s always the used market, and that someday their beloved brutes will tear ass across a post-apocalyptic landscape, and be known as “the last of the V8 Interceptors.” This is going to be OK…

$100,000 can buy you an awful lot of cars these days. This morning I could have bought a 2011 Lotus Elise with 1100 miles ($42k), a 2003 Chevrolet Corvette Z06 with 16,000 miles ($24k), a 2003 BMW 745Li in mint condition with 80k (18K), and enough left over to take my family on a two month cruise.

But back in 1989 I could not have bought this car brand new for $100K. Not even close. A Mercedes 420 SEL would have set you back $111,000 in inflation adjusted terms before adding options, taxes and bogus fees.

I ended up buying the one pictured a few weeks ago for $1300 (and $115 auction fee). Should I…

Rent: Hell no!

Finance: Double hell no!

Sell: An awful lot of these cars are doing time in junkyards and inop sales throughout the country. Why? Because they are hellaciously expensive to fix. Little issues require constant attention in 80’s Benzes. A/C systems. Electrics. Powertrain issues. Paint. When a Mercedes gets to be 22 years old and 201,000 miles it becomes a rolling money pit.

But this one is different.

It has over 70 maintenance records. We’re not talking about Jiffy Lube and Wal-Mart maintenance records either. Try $5000 for a rebuilt Mercedes factory transmission that was installed only 20,000 miles ago. $2000 for a completely remade interior less than 10,000 miles ago.. $3400 for an engine rebuild about 50,000 miles ago. Not to mention near $100 oil changes and brake jobs that were firmly in the four figures.

This car is a rolling testament to blind love… and maybe even a bad marriage.

So where you can find buyers who love a car beyond all logic and reason? Ebay. When it comes to old non-collectible cars, Ebay can provide a price premium that goes far beyond the realm of reason.

I sold it for $2850. Not a lot of money. But more profit than I can likely get anywhere else.

Keep: There is one thing you can’t avoid if you sell cars on Ebay. Clueless people buying cars they know nothing about. Despite verbose warnings about my desire to sell it to a Mercedes enthusiast, I ended up meeting a nice older lady who was clearly out of her element.

“Thanks Mr. Lang for getting back to me so quickly. Does the car come with a warranty?”

“No maam. My policy has always been if you don’t like it, you don’t have to take it. It’s as simple as that.”

“I got the car for my daughter who is a single mom with kids. Do you think this will be a good car for her? I do like Mercedes.”

“Oh, hell no!”

I went on to explain to her ‘why’ a car like this needs so much maintenance. She hightailed it back to North Carolina and now I get the pleasure of relisting it.

Hopefully it will go to a better place. Perhaps some enthusiast who can match their blind love with a big fat wallet.

The International Crime Complaint Center (IC3) warns that

Online vehicle shoppers are being victimized by fraudulent vehicle sales and false claims of vehicle protection (VPP) programs… Criminals also attempt to make their scams appear valid by misusing the names of reputable companies and programs. These criminals have no association with these companies and their schemes give buyers instructions which fail to adhere to the rules and restrictions of any legitimate program. For example, the eBay Motors Vehicle Protection Plan (VPP) is a reputable protection program whose name is commonly misused by these criminals. However, the VPP is not applicable to transactions that originate outside of eBay Motors, and it prohibits wire transfer payments. Nevertheless, criminals often promise eBay Motors VPP protections for non-eBay Motors purchases, and instruct victims to pay via Western Union or MoneyGram.

No wonder online new car sales have been struggling. Hit the jump for IC3′s list of warning signs.

According to the center’s release, buyers should beware

• Sellers who want to move the transaction from one platform to another (for example, Craigslist to eBay Motors).
• Sellers who claim that a buyer protection program offered by a major Internet company covers an auto transaction conducted outside that company’s site.
• Sellers who push for speedy completion of the transaction and request payments via quick wire transfer payment systems.
• Sellers who refuse to meet in person, or refuse to allow the buyer to physically inspect the vehicle before the purchase.
• Transactions where the seller and vehicle are in different locations. Criminals often claim to have been transferred for work reasons, deployed by the military, or moved because of a family circumstance, and could not take the vehicle with them.
• Vehicles advertised at well below their market value. Remember, if it looks too good to be true, it probably is.

The LA Times reports that scammers recently used and Edmunds.com lookalike page to defraud online car buyers. Keep a watchful eye on all online auto sellers, and be sure to report any attempts of fraud to local law enforcement, the IC3 and, if you want to take justice into your own hands, write up your experience for TTAC. To defeat scammers, we all need to pull together.

Twenty years from now I’ll still be looking at cars. They may become faster than today’s sports cars and more luxurious than a Mercedes S-Class. But many of us enthusiasts will find something missing within all their awesomeness

That’s because great cars are not about perfection. They are about character. With that in mind, I found a pristine 1995 Lincoln Town Car the other day. With good miles, pristine leather, and a driving experience as Americana as a 1965 Mustang, it may someday become a collectible worth keeping. But then again…

Consumable: These things are as common as wigs and pill popping in today’s retirement communities. The 4.6 Liter engine was used in almost every rear wheel drive car Ford built from 1993 to 2011. Millions of vehicles were given the same powertrain ad nauseum.and with that comes a startling array of authentic alternatives.

Are any of them better or more ‘authentic’ than my Clinton era Town Car? Do they represent ‘the ‘good old days’ in better ways than the interminable time warp that only comes from a car marketed to those tired but no so poor masses who yearned for luxury above all else?

Collectible: No. Not in my estimation. The Thunderbird was an overweight flop. Crown Vics only have their cop cars and special editions offering true cache. The Mark VIII may have greater power and twice the technology than a Town Car. But it is also a buggy little bastard with an interior that is a testament to low grade plastics and petrochemicals.

To me the 1995 Lincoln Town Car is the Rolls-Royce of body-on-frame Fords. The dashboard was finally given a contemporary look (for it’s time) that also offered enough computerized frippery to be considered quaint in the decades to come. Much in the same way as 1960’s radios and dashboards are considered de rigueur in today’s car world.

The Total Package: But the ultimate complement to these Town Cars are their bodies. Rectangular and squared to the power of presence. There is no mistaking a Town Car for anything else on the road. Beyond the design dynamics, there are also precious vehicles of that time which will offer you the same level of  quietness, detachment and float. Few of which were worth a flip.

Cadillac Devilles of the mid-90’s were rolling billboards attached to ticking Northstar time bombs.Auroras had bugs and defects that were so thoroughly vested within it, that few offered their owners any long term bliss. Other Oldsmobiles were boring and bland. The Chrysler LHS had an Iacoccas worth of cheap plastics on the inside.

As for Buick? The sedan was nothing special. But I will give kudos to the wagons. Many of which may become to Ultra-Orthodox Jews what horse and buggys are to the Amish.

I think many of the classic car collectors of 2025 and beyond will love a 1995 Lincoln Town Car. What says you? Am I riding shotgun on today’s automotive prognostications?  Or am I stuck in the Town Car’s cavernous trunk hoping that the exhaust fumes don’t overtake my delusional state of judgment? Time will tell. But what says you?

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.

Making the Offer:

If you’ve followed parts one through three of this series congratulations! You’ve found a car that’s superior to 90-plus percent of what’s out there. Rejoice and let the seller enjoy the benefits of properly maintaining his car.

How to Value the Car:

NADA tends to have high valuations while Kelly Blue Book overprices late model vehicles and underprices older ones. Contrary to reality, you can’t find many good $1000 cars regardless of what the Blue Book says. Nor should you get a 2000 Mercury Grand Marquis with over 200k+ for the NADA pie in the sky price of $5000. Stick with Edmunds private party values or the ‘completed items’ section on Ebay.

Negotiate After the Inspection, Not Before:

Some folks believe that you should make an offer before the final inspection. I never do.

The reason is that sellers will then get stuck on an unrealistic price if there are major maintenance issues. A $5000 car that needs $1000 in maintenance was never a $5000 car in the first place.

Most sellers will get stuck on that ‘perfect’ number and reject any substantial adjustments. A good inspection will always yield both parties an offer based on the car’s condition.

How to Negotiate

Begin by declaring your intention to buy the car… so long as the repair costs are addressed in the price.

If these repairs are minor, immediately offer to split the difference for the repair costs and call it good. If, however, mission critical repairs run into the high hundreds to thousands of dollars, you have an “opportunity” ahead of you.

Summon the mechanic!

Ask your mechanic to fax the used car’s inspection report to the seller before you speak with them. At first, the seller (and possibly you) may be shocked by the numbers involved.

This can be especially true with older vehicles and luxury cars. However, with a little constructive conversation, even the most alarming repair costs needn’t kill the possibility of an amicable agreement.

Do The Right Thing

I like to start negotiations for cars with repair “issues” by giving the seller an opportunity to do the right thing. “Given what’s in front of us right now,” I ask. “What would be the fair way for both of us to resolve these repair costs?”

Worst case, the sellers stand pat. In that case, walk. Best case, the seller says they’ll simply lop-off the total bill from the asking price. If that happens, it’s time to shake hands and do the deal.

Compromise

Some sellers begin by offering to reduce the asking price by a very low number. They figure you’re there to haggle (hoping you won’t).

Provided the asking price minus 50 percent of the repair costs is acceptable, again, offer to split the difference.

If that doesn’t work for either or both of you, it’s time to go through the inspection report– and the probable costs of repair– line by line.

Not all repairs are equal

Keep in mind some items are your financial responsibility. Unless it involves a major repair (timing belt, water pump, adjusting the valves, etc.), upcoming maintenance regimens are always down to you.

Don’t sweat the small stuff

In particular, oil changes, tune-ups and replacing filters that aren’t necessary right now should be removed from your list. By doing this from the onset you’re showing goodwill and fairness.

Find an alternative when you need to.

If the seller claims the cost of repair listed in your inspection is too high, ask them if they know of another mechanic who’d be willing to do it for less, and the type of guarantee they will offer. I’ve seen $450 repairs with 30-day guarantees turn into $200 repairs with a full year guarantee. If the car is worth it to you, it pays to explore alternatives that will benefit both of you. It may take research and patience, but it can be done.

Tit-for tat works wonders

Finally, if you have experience repairing minor automotive issues, use that skill to create some wiggle room to help close the deal. “You know, I think I could handle that myself. What do you think about us taking off x repair? Would a price of y make it a fair deal for both of us?”

Take it or leave it

If you can come to a mutual understanding, enjoy your ride! If not don’t beat a dead horse. I like to back-out by thanking the seller for their time. Leaving a copy of the inspection report as a “gift” and telling them my final price, should they reconsider. Above all don’t sweat it. There are plenty of excellent used cars out there looking for a good home.

Let’s Recap

To get a great deal: research diligently, test drive patiently, let an expert figure out the unknowns, and negotiate in good faith. Do this and you’ll save unnecessary test drives and thousands of dollars in future repair costs.

You’ll also buy the cream of the automotive crop at an extremely fair price.

About a month ago, TTAC’s Steve Lang hipped readers to the fact that used car prices had grown like crazy, and that the time to sell that old car had come. Now the mainstream media is starting to wake up and smell the 30-weight, and the wires are flooding in with stories of used car prices gone wild. The LAT reports that Kelley Blue Book values have risen an average of 16% per year in the 2008-2011 period. Autotrader saw 13 of their top-20 CPO models add at least a grand to their prices in the last month alone. And  Bloomberg reports that 2011 BMW Dreiers and M3s now cost only $34 per month more than year-old models, and that new Corvettes can actually be had for $12 per month less than year-old models according to Edmunds.com data. Considering an Acura TL? New models are typically $18 less per month than year-old versions. So what’s going on?

New lease sales fell to 1.96 million in 2008 and 1.13 million in 2009, according to Manheim. Lease originations that averaged 2.78 million during the previous 10 years dried up as lenders such as GMAC Inc. and Chrysler Financial Corp. withdrew financing offers.

Leased vehicles’ input to used-vehicle supply will be 2.08 million units this year, a 40 percent drop from 2002 levels, according to Manheim. Off-lease volumes will keep declining through at least next year, to 1.53 million, Manheim says.

Sales to rental fleets, which fell to 1.13 million vehicles in 2009 from more than 2 million in 2006, may not exceed 1.5 million until after this year, according to Manheim. The 2011 contribution to used-vehicle supply from rental fleets will be about 1.4 million vehicles, a 30 percent drop from 2005 levels.

But here’s the real question: how long can this last?

Steve argued persuasively that prices were going to come down, and that fuel efficient used cars were going no-sale at auctions because of their high asking prices. But, consistent with TTAC’s out-of-the-mainstream opinions, a lot of analysts seem to disagree. Edmunds’ Joe Spina tells Blooomberg

 I don’t expect any dramatic decreases in used prices for at least 18 months.

AutoNation’s Mike Maroone adds that

Used pricing will show “continued strength” [because] demand from price-conscious buyers that was already strong because of the slow economic recovery was exacerbated by Japan’s production disruptions and the shortages of new vehicles that followed.

NADA Used Car Guide automotive analyst Jonathan Banks tells autoremarketing.com

Looking ahead, we anticipate that light truck values will do well during the upcoming quarter primarily due to the stability in gas prices and very low used supply. We were already anticipating a 6-percent increase in truck and SUV prices from used supply alone. If the current gas price situation continues, there may be room for prices to increase even more

Manheim Consulting’s chief economist says

 The shortage of low-mileage used models “will last for some time.”

But, given the market’s self-determining nature, these echoes of the “high used prices are here to stay” theme could in itself signal the end of the run-up. In the spirit of Steve’s brave look into the future, I’m wondering where you see used prices going over the next year or two.

I’m not sure any female car enthusiast would ever be happy with the name Sephia. Just saying that name alone can induce ugly flashbacks for prior owners and dealers. Sportage rhymed with ‘shortage’ and had parts that may have indeed come directly from plastic soda bottles and aluminum foil. Then there was this plain wretched thing…

Rent: I bought the 2004 Spectra GS for $1650 back in tax season. A time when dealers gleefully pay too much money for crap that nobody wants. I thought a late model Kia would be an easy sell since everyone’s dog now wants a small car with great MPG’s. The Spectra delivers on that count alone. But pretty much has lost it quite literally on everything else.

The top of the steering wheel had whittled to nearly half it’s diameter thanks to Kia’s use of cheap leftover rubbers. Or was it hardened play-doh?

The Tonka rivets that had kept the door handle assembly together had somehow melted to gristle. Not even a rattles worth of their past existence. Or the three cent grommets that had been glued to a leftover post-it note to hold the rest of it in place. I had to position three large screws from an old TV set just to keep the thing attached to the door.

Lease: Then there was the dashboard. Those who have old beater Tauruses in arid climates will be familiar with the gaping holes between the dash and the instrument cluster. As the vehicle ages the glue holding the two together gives out. Leaving a corroded glue gaping mouth as a painful reminder of Ford’s cost cutting.

In the Spectra this ‘mouth’ wasn’t measured in centimeters but BIG gaping inches. Enough space to serve as CD storage for an aftermarket stereo that was no doubt recycled from a Clinton era pawn shop.

Sell: Truth be told the Spectra has only two things worth mentioning. The mileage and the price. With 115k miles some folks would assume that the vehicle has another 70k to go. It does if it gets recycled into something else. I’m not saying this car is complete garbage. The replacement engine is quiet and the second (or third) clutch does the job.

But there is no joy here. It’s as if Kia had aspired to create a Corolla and came up with a colonic. I have received over 50 interested parties since February and with each test drive came the ubiquitous words, “Do you have anything else?”. Or “I just wish this car had…” usually finished with a disparaging remark about it’s quality levels. Which over a brief seven years have left this Kia as somewhere between Soviet and third world.

Keep: I may have to keep it until the next ‘tax season’. While the 1985 Cressida sold in a matter of hours and a 1991 Volvo 240 was bought within minutes of it coming on the lot. This Kia may indeed be the ‘unsellable car’. Joining three door minivans, V6 powered Mercury Cougars, and the Chevy Corsica as permanent fixtures in wholesale heaven.

Certain vehicles tend to celebrate birthdays and anniversaries at the auctions. The wrong car with the wrong build quality, and the wrong features, and the wrong color. Let’s visualize: just imagine an old beater with peeling brown paint and some ‘authentic’ quality quirk. No door handle. A ball of rubber bands serving as the top of the stickshift. Maybe some pliers in place of the steering wheel. That car of imminent crusher fodder may indeed be more sellable than this Kia. I screwed the pooch on this one.

[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.

Now mechanics tend to divide into three categories: the shade-tree, the Nazi and the diligent professional.

Shade-tree mechanics are hobbyists on limited budgets. Due to the lack of equipment (or experience), they may not be familiar with the unique wear issues and maintenance needs for your vehicle. The shade-tree mechanic will look at the car’s basics, take it for a short test drive and call it good (or “not bad”).

The Nazi will attempt to perform every mechanical test known to wrenchkind. Submit the car to a standard of inspection that is rooted in la-la land. Then make you financially fearful of buying anything other than (cough! cough!) one of their vehicles.

Obviously the Nazi is a non-starter. Often times these party members will work for dealerships (but not always), and are therefore pre-occupied with meeting their service department’s monthly quota of service hours and revenue.

Unless your next car has a prancing horse or bull at the front of it, you’re usually far better off with a diligent mechanic. The diligent mechanic will work through a standard check list and then take the car for a test drive in a variety of operating conditions.

Diligent mechanics are experienced independent professionals with established roots in your community. To find one I strongly recommend visiting the Mechan-X files at Cartalk.com.

I also can’t over-emphasize the importance of personal recommendations; especially from people who own the same model of car you’re considering buying. Many small to medium-sized repair shops will post testimonials on their “ego wall.” Read them carefully.

Before the inspection takes place, collate the list of the concerns you created during the test drive. When you deliver the car for inspection, go over them with the mechanic one-by-one. Make sure you both have a clear understanding of all your potential concerns. This will provide a base line for the inspection to follow.

Some mechanics inspect used cars for a set fee. Others charge an hourly rate. In both cases, the post-list discussion should conclude with a confirmation of the probable inspection cost. Leave some leeway; you don’t want the mechanic to stop their investigations for the sake of a few bucks. (Leave your contact number for this possibility.)

The best way to build a healthy relationship with any mechanic is to simply try not to be one of “those” customers. Just let them get on with their job. Don’t stare at the mechanic while they’re doing the inspection. In fact it’s best to leave the premises entirely. And don’t phone your mechanic two hours later and ask for a status report; wait for their call.

Once the inspection is completed, sit down for a one-on-one debrief with the mechanic who made the inspection (even if you have to come back on another day). I always prefer to speak with the actual mechanic or at least have them in attendance with the “service advisor.”

Let the mechanic speak without interruption. Some diligent mechanics will go on for quite some time; some will simply say “here’s my report.” Either way review the information and let him explain every issue and potential issue to you. After they’re finished, don’t be afraid to say “I don’t have a clue what you’re talking about” or “Is this a sign of normal wear or abuse?”

Make your own list of trouble spots from this conversation. Note down the potential cost to repair and whether or not the issue is urgent or eventual.

Once you’re finished the play-by-play, ask a few general questions. I always ask “Did the owner do a good job maintaining this vehicle?” and “Did the owner use good parts or cheap parts?” Either of these inquiries usually invites a deeper insight with the mechanic.

If the used car has survived the inspection process without revealing any critical issues to your diligent mechanic, it’s time for the final negotiation with the owner.

“Ask Amy” advice columnist and self-help memoir author Amy Dickinson has the late Ann Landers’ old slot on the Chicago Tribune. She also has a 1967 Morris Minor. She fell in love with the car the first time she saw one, soon after she moved to London with her then-husband, in 1986. “They are so cute, they look like ice cream cones,” she says. She loves the clatter of its engine, and the way people smile when she drives by, and she says it is her favorite material object in the world.

So after her husband embarked on an open-endedly extended business trip, in 1988, Dickinson, then a housewife, took her five week old baby, Emily, in a taxi to a dealer who restored Morrises, and made her purchase, for 1,500 pounds (roughly $5,000 in current dollars). “One advantage of driving a beautiful, quirky vintage car is that it really helped me meet people,” she says. “So many men said to me, ‘I had one of these,’ and ‘my dad had one of these,’ not to mention ‘getting rid of my Morris Minor was my biggest mistake.’”

Soon her marriage came undone, and in 1990 Dickinson returned to the US with her daughter, to become a journalist. Before she left London, she was able to have the steering wheel and controls switched from right to left, an operation that was easy by design, since British Motor Corporation sold Morris Minors all over the world. (This was the first British car to produce a million copies, the millionth rolling off the assembly line on December 22, 1960, according to the Morris Minor Owners’ Club.)

The car actually jump-started Amy’s career. Her first radio piece was a commentary on National Public Radio, where she described the Morris as “…shaped like a Volkswagen [old] Beetle with a water retention problem. It manages to seem both massive and tiny at the same time. It has kind of full-figured fenders that remind me of the Duchess of York’s hips. And the grill in front looks like a gaping, demented, laughing clown mouth, the kind that shows up in your dreams when you’re a kid.”

Those descriptions notwithstanding, Amy also has a sophisticated… uh, well, experiential appreciation for this well-regarded 20th century design by Sir Alec Issigonis, who is perhaps best known for penning the original Mini, but whose reputation extends well beyond the world of cars. “There is not a plane on the entire surface of that car,” says Amy. “You realize this when you try to put your cup of coffee down somewhere as you go to open the door.” (Amy admits to having spilled her coffee more than once.)
Amy drove the un-air conditioned and poorly heated car year-round, joyously ferrying her daughter hither and yon, despite Washington, DC’s miserably hot and humid summers. Daughter Emily says that the Morris always got lots of attention, and one of her friends used to love to ride in the car so he could get noticed doing the Presidential wave, and that when her mother let her off for preschool, a neighbor of the preschool would always let her mother park the Morris in his driveway. Unfortunately, the winter salt corroded the sheet metal, and in 1995, Amy regretfully stowed the Morris, and bought one of those rust-free, plastic Saturns.

“The Morris sat in a garage [for eight years], quite neglected, like an old boyfriend, and I got to where I felt so bad about it I couldn’t even look at it,” she says, mournfully. But remembering all the Englishmen who had told her how much they had regretted selling theirs, she hung on to hers.
Then, in 2003, the Chicago Tribune hired her, boosting her finances, enabling a resurrection. Before she and her daughter set off for the windy city, she drove the Morris to Vintage Restorations, now in Mt. Airy, Maryland, where they worked on pride and joy whenever she could send money.

“She’s an unusual kind of person,” says John Tokar, owner of Vintage Restorations, noting that the handful of owners of Morris Minors he has restored have all been endearingly eccentric.

Amy says her love for vehicles of all sorts stems from having been raised on a dairy farm. “My family’s primary vehicle for some years was a dump truck, which my mother drove like a pro,” she says. “I’m not a gearhead, but I do love cars. I always have. And I love to drive.”

In 2008, Amy moved back to her hometown, Freeville, NY, population 505, not far from that dairy farm, to help care for her elderly mother. There, the Morris gave Amy valuable cred with some important people at a critical juncture in her life. She took up with a local guy she’d known since seventh grade. Soon they were married. “He has four daughters,” she says. “Once they got a load of this car, I think that increased my mystique.”

One of the great things about the car, says Amy, is that it spreads good cheer everywhere it goes. It looks cheerful, she says. The Morris even cheered Amy after her recent bereavement. “My mom passed away in February, and I had the car in the barn [for the winter], and I couldn’t wait for spring to come so I could pull the cover off, jump in, and tool around,” she says.

In the Morris, says Amy, she thinks not about where she’s going, “but how much fun I’m having getting there. There’s no radio to distract me, the engine chugs along, the windows squeak up and down, and people smile, wave, and honk. It’s really fun to tool around in something that inspires universally positive reactions.

“You know how beautiful women get notes? My car gets mash notes. Instead of people asking me for my phone number, very frequently there will be a note on the car, addressed to the car, saying ‘if you ever want a new home, call me.’”
In fact, despite the ample cost of the restoration, Amy says that if you amortize all the money she has spent on the Morris over the 23 years she has owned it, or even just the 15 years she’s had it running, it has bought her a cornucopia of inexpensive joy.

“If I were a car, I would be this car—a little past my prime, but I still run pretty well, pretty simple, not too complicated,” says Amy. She adds that “I have always enjoyed lots of different vintage things,” including vintage clothing. “People who know me say, ‘oh, yeah, that car is you.’”
* * *

Fun fact about Morris Minors, courtesy of Amy: The Tamil Tigers, a militant separatist organization, would remove the drive shafts, and use them as rocket launchers, after which they’d reinstall them and drive off.

The BMW Z3. In my mind this model is the only convertible of the late-90’s that made the 2nd gen MX-5 seem… a bit plain. Even with a near 10k premium when it was released, this car was quite a hot commodity for those willing to pay for the privelege.

But what if we could turn back time just a bit? What if right now I could get you a forest green 1997 BMW Z3 with the 1.9L four cylinder, all the options and only 21,000 miles on it? Would you be willing to pay.. say… $10,000+? Well guess what…

Someone did just that. Even though that was about two to three grand more than what Ed would have paid, I still think it was a reasonable proposition. A third of the price for 85+% of it’s lifecycle is the exact type of bargain I would usually seek if I were an owner instead of the dealer. .

Unfortunately the guy selling it will likely want at least 12 grand for it on Ebay. Throw in the auction fee and transport… and $10,500 will be the amount he has in it even before changing the four rotting tires and giving it a tune-up.

Today’s buys included the following…

2010 Toyota Prius 50k (Frame Damage) :  $17,300

2009 Dodge Caliber SXT (92k, Auto, Alloy) $ 7,500

2003 Infiniti FX35 123k (Leather, 4WD):      $12,300

1998 Lexus LS400 165k (White, Fleet)       $ 6,600

1998 Volvo S70 (5-speed, Base, White)     $1,515

1997 Lincoln Town Car 59k (INOP, Needs Paint)            $ 700

I’ll leave it up to the Best & Brightest to figure out which one of these six I bought. I’ll give you a hint. It wasn’t a home run by any means. Given that there were 95 dealers looking at the exact same vehicles at the same time, the opportunity for a grand slam today just wasn’t there.

I was happy as can be this past Monday. A 1999 Firebird with T-Tops was bought for the princely sum of $2750 at a recent sale. Then there was something I hadn’t experienced in a long while. A $300 car. A ‘good’ $300 car. The type that may have nothing more than a banged in door or a mechanical issue easily corrected by visiting an enthusiast site. The car in question was a 1986 Toyota Cressida. Older than dirt as far as cars go.

But then again could I…

Rent: Yes I can. The silver paint on top may be more faded than 25 year old blue jeans. But everything else was fine with it. That is if you’re legally blind. The leather interior had cheap seat covers and the rear driver’s side taillight was held with tape. But what the hell do you expect for $300?

I had bought a 1987 Acura Legend last year for $350 that managed to survive 10 weeks of rentals and nearly 10 months of financing up to now. The weekly payment and rental rate may be uber-cheap due to it’s age. But so far I’ve yielded $2500 from it. This Cressida, another over engineered Japanese marvel, may have serious potential here.

Finance: This is always the tough part. Someone who only has $300 may just trash and neglect this old codger. But at $500 down? They want something nicer. The trick is to first rent it out for a very reasonable rate. Say, $15 a day or $105 a week, and have half the payment goes towards the down payment on the vehicle. In due time you should be able to figure out if the car and the potential owner will last.

From that point forward you can either offer the car as a 50/50 ($50 a week for 50 weeks) or $40 a week for 15 months. What you are selling at this point is transportation. Cold air. Power everything, a sunroof, premium sound… yes the car in question is older than dirt. But you are providing a fair amount of features and convenience for a price that comes close to mass transit in metro suburbia.

Sell: This one has been kept in metro-Atlanta since day one. No rust. Everything works (really!). When I opened the hood I found this…

And let me repeat this… everything works on the vehicle. It’s a time capsule. As such it belongs in one place. Ebay. A rust free classic car usually finds it’s sweet spot online. Even if it’s not much of an enthusiast’’s vehicle. All it takes is two aficionados to send the selling price to the moon.
What I would do is give it a scuff and shoot paint job for $200 and then perhaps find someone with a wrecked spare like this guy.

Offer the spare for a fixed price on Ebay to the high bidder, and sell the Cressida at no reserve with the nicer interior parts already installed. This will give the new owner easy access to cheap parts and enables them to keep a nice looking classic for the long haul. My experience is that when you do this the final bid amount increases by about 15% to 25%.

Keep: Old cars are an addiction. A blinding and financially parasitic addiction that will force you to spend big money on outdated technology. On a car or truck with ‘presence’,. you get the return. A Cressida though is not a collectible. It’s a consumable. The type of car you use until all that’s left is an immovable shell destined for China.

If I hauled the Cressida around Atlanta as my daily driver I would spend well over $2000 extra in gas a year. The Cressida averages about 20 mpg. The Insight… 55 mpg. It’s not even a contest. Plus everyone loves that little hybrid. I don’t see the Cressida stepping up to the daily driver spotlight anytime soon.
So what should I do? Rent it and potentially make it into a finance deal? Sell it on Ebay? Maybe I could make it into the ultimate luxury sleeper by buying up that wrecked car’s interior and use it whenever the mood is there.

Screw that idea. I’m not in the keeper business unless the numbers line up. So what says you?

NOTE: I do have to give special kudos to Jeff Nelson for writing a brilliant article about the 1986 Toyota Cressida only a couple of days ago. How two people in the same state end up writing about the same car for two different editors with the name Niedermeyer is beyond me. Who knows?: Maybe I will just have to sell this car to Jeff.

Used cars give automobile buyers the best possible bang for the buck– except when they don’t. As a professional dealer, I could tell you stories of used car calamities that would make public transportation seem like the only sensible option. Tales of stitched together death traps that looked as new as the day both cars were born. Cars with supposedly clean registration papers that turned out to be hotter than Peachtree Street in mid-August. Instead, I’m going to tell you how to buy a used car without getting your proverbial clock cleaned.

Finding an appropriate used car is a pretty simple business: decide what kind of car you want, research it online (especially model and brand-specific enthusiasts’ sites) and then go out and find one.

You can find a great car at a variety of sources: private, owner, independent used car dealer, used car superstores, new car dealer; even a “buy here / pay here” lot might stock a great vehicle or two (credit the law of averages). On a percentage basis, I’ve found that private owners and independent dealers offer the best bang for the buck. Conversely, your neighborhood impound lot or public auction is a no-no nadir.

When you make contact with the seller, ask for the car’s VIN (Vehicle Identification Number). That’s the government-mandated ID code welded onto the car’s chassis (and attached elsewhere), and listed on the car’s registration papers. Thank the seller for the info, tell them you’ll call them back, and hit the ‘Net.

Plug the car’s VIN number into Carfax’s or Autocheck’s on-line database. For a nominal fee, these sites will tell you if the car’s been flooded, torched, stolen, crashed, rebuilt, salvaged or had its odometer rolled back. Equally important, it’ll let you know if the car was a rental, a fleet vehicle or had a long series of owners (i.e. sporty models with neglectful owners are financial time bombs).

This due diligence must be done, but the information is far from perfect. Any damage not filed in an accident report won’t show up. Arbitration issues can also fall through the cracks. When TTAC alum Frank Williams checked an Audi he once owned, the report made no mention of the fact that Audi

bought back the car under Lemon Law provisions.

To fill the holes in a used car’s mission critical history, it pays to dig a little deeper.

Contact the service department at the brand-appropriate dealership and ask the service advisor for a maintenance report. By law, dealers can’t print out the information or give the owner’s name. But they CAN verbally report a car’s service history. If you’ve got the wrong dealership, contact the seller and ask where the car was serviced.

This brings us back to your most important source of car-specific information: the seller.

After you’ve secured the VIN and done your homework, call the seller back. There are dozens of excellent questions you can ask, and one you shouldn’t: what’s the price? Avoid negotiating price for the same reason you wouldn’t bid on a house without looking inside.

Here’s how I do it:

“I like to catch up on maintenance whenever I buy a car. Can you tell me where the car was serviced, what you’ve done lately and if there’s anything else I’ll need to do in the next year or so?”

“I usually have my cars inspected at ‘x’. If I like the car, would it be OK to have it inspected?”

I always use conditional words and phrases– “Can you… would… do you know…is it possible.” It’s non-threatening, and the polite approach encourages the owner to provide additional information.

Thank the seller; you’ll call them back when you’re ready to see the car in person.

If confidence is still high, it’s time to determine an appropriate price. Forget Edmunds, Kelly Blue Book and NADA. For popular late model used automobiles, eBay’s ‘Completed Items’ section is the only pricing guide that matters. Specifically, check out your prospective purchase’s green “ending price.” The number reflects the final purchase price for cars that actually sold in the marketplace.

If there aren’t any recent or enough listings, go to your local bank or credit union. Tell them you’re looking at buying a used car and ask them to print out an industry wide pricing guide called the Manheim Market Report (MMR).

The MMR lists wholesale and retail used car prices based on millions of recent transactions. Although the MMR is not for public consumption, almost all financial institutions with an auto lending department have access to this information.

Time for a bid? Nope. Time for a test drive.

Mr. Lang invites readers to share their used car buying advice and their used car triumphs and tragedies below.
He can be reached at steven.lang@alumni.duke.edu

Have you ever been to an auto auction? Some may consider an auctioneer to be a ‘carny’. He talks at over 200 mph. Mumbling what appears to be nothing more than gibberish and random numbers.

But if you added all the sales up by those supposed hucksters, you would soon realize that only Wall Street and Walmart sell more goods over the course of a year. Over ten million cars are bought and sold at auctions by these professionals. Hundreds of thousands of dealers have access to the vehicles. With all that free market competition taking place, Carmax is just one of many dealers that must compete for all those cars.

Can Carmax offer a ‘good value’ compared to all that competition?

The fairest way to look at this is to compare apples to apples. Ebay is a godsend in this respect. Their online auction marketplace offers the products of thousands of dealers and with a ‘completed items’ section, it’s fairly easy to match and pair similar products that Carmax offers  with ones from online dealers that have strong positive feedback.

So let’s compare…

This wasn’t surprising. To be blunt about it, Carmax has to pay a lot of middlemen. They have a fully staffed corporate office, over ten thousand employees and $4 billion in long-term debt. Between the shareholders, executives, bondholders, employees, and contractors, there is a lot of margin that needs to be made on each one of their cars.

An online seller doesn’t have anywhere near this expense. Since virtually all dealer auto auctions cater to independent used car dealers, the barriers to buying the same cars as seen above is between small and non-existent.

Carmax can acquire some vehicles in ‘closed sales’ where the manufacturer will restrict purchases to new car dealers. However these opportunities are very few and far between and most Carmax dealerships have no new car franchise.. As shown by some of Ebays larger sellers, you can generally get the same type of vehicle without having to pay a healthy four-figured premium.

Does Carmax have some advantages? Absolutely. You typically don’t have to wait as long to buy your car. Like any brick and mortar dealership, you also have an extensive number of vehicles to check out and test drive beforehand. A lot of folks like to kick the tires first before buying anything. Carmax does offer that luxury along with the assurance of a 5 day money back guarantees and a 30 day ‘Limited’ warranty.

But there is also nothing stopping the same customer from test driving a vehicle at a local dealership and then buying it online for thousands less. This is where Carmax falls short. For those who already know what they want and are patient with the buying process, online dealers are the way to go. Many of the vehicles that are sold by Carmax already have manufacturer warranties that far eclipse the 30 day ‘Limited’ warranty. So the assurance of this restrictive warranty is usually minimal at best.

Unless you need it right now, the large scale online dealer will usually have the better deal.

Would you pay over $3000 for a 20 year old car? How about if it was a base 1991 Chevrolet Caprice in faded battleship grey with only 37,000 miles? As much as I love driving a big boat, owning an ancient mariner like this Caprice would have been no picnic. By the time you end up replacing all the worn items and catch up on the maintenance issues, you would be looking at nearly $4,000. It wasn’t a great deal. But with 95 dealers all looking at the same vehicle crossing the block, I got to see a lot worse.

A base 2000 Toyota ECHO with 112k went for over $4000 when you throw in the auction fee. Keep in mind we’re talking about a a ‘base’ model which means no power anything and an interior inspired by the Japanese version of Tonka. The dealer will likely try to get $1000 down and around $60 to $70 a week in payments. In today’s market that’s not bad. But waiting over a year to break even and risking non-payment, accidents and neglect is one hell of a risk.

Then there were the odometer issues. A 2004 Toyota Camry LE sounds like a good deal at $4700. Throw in 245,000 and a near $200 auction fee and you’re looking at a $5000 car wholesale by the time the vehicle is transported to the lot.

I’m willing to bet that the Camry is sent somewhere overseas. Toyota’s go for very stiff premiums in the Middle East and much of West Africa and one that is cosmetically nice will go for a higher value than one that has been hammered back to shape.

I can see this ‘American spec’ one easily following in those footsteps with a ‘revised’ odometer cluster that reflects it’s low wear. Also there was a 2009 Camry LE with 127k that went for $9900. Neither one of these Camrys had moonroofs or other preium options that would command these prices. Other than their nameplate, there was nothing that would have made a sane buyer bid these prices at an auction.

The 2002 Buick Regal that sold for $4600 was more of a mystery than the Camrys. Cloth interior. No roof. No premium sound or upscale options. Has the market completely lost it’s mind? The fact that it had a bit over 85k may have helped it’s cause. But geeze! This car would have sold for just $2800 a couple of years ago. I would be scared to finance it.

I did buy two low-end vehicles today. A 1997 Jeep Grand Cherokee with leather, 1 owner, 130k, I bought for $1350. Then there was a 1997 Chevy Lumina, garage kept, 159k that went for $1050. Both of them were decent buys. But not nearly the shangri-la of a few years back when I could find good five year old vehicles for less than $5000. Today that $5,000 vehicle will be twice as old and half as good.

Logic makes you think that used cars sales would skyrocket at the moment in Japan. The auto industry barely has started producing and will not be back to normal before the end of the year. Hundreds of thousands of cars have been destroyed. In Japan’s Miyagi Prefecture alone, 146,000 cars are estimated to have been severely damaged or destroyed, 10 percent of the 1,540,000 cars registered in the Prefecture. Used cars should be flying off the lots. But the opposite is true.

April saw the second lowest level of used car sales since their statistics were recorded starting in1978, the Japan Automobile Dealers Association told The Nikkei [sub]. Used car sales dropped 9.8 percent on the year to 309,693 vehicles in April, their fifth straight month of decline. Why? Lack of trade-ins. Supplies of used cars were tight before the quake, because new cars sales had been down.  With new car sales down by 51 percent in April, inventory of trade-ins became even tighter.

Logic was rehabilitated in the quake-stricken Tohoku region where used car sales increased.  People there had no other choice than buy used cars, sometimes at new car prices.