By on November 10, 2011

October and the first half of November have historically been a great time for dealers to buy cars on the cheap. There are no spending holidays. No Christmas or end of the year bonuses. No tax refunds. Not even a hint of federal legislation that may push old beaters onto the ‘cheap’ side of the ledger.

But there are thousands of used car sales managers that see nothing but big losses on much of their inventory at this time of year. The green Hummer that seemed like such a great deal back in red-hot June may be molderizing at the back of the lot by November. Same goes for the trade-in’s that were valued perhaps a bit too strong… just so the deal on the new car could get done.

This is usually a great time to buy. But not always.

Here are some of my most recent purchases:

  • 1993 Lexus LS400 (Auto, Leather, 180k $725)
  • 1996 Chevy Camaro (5-speed, V6, Leather, Black, Large Spolier, $1815)
  • 1998 Lincoln Navigator (Auto, Leather, 190k $1815)
  • 1998 Lincoln Town Car (Auto Leather, 176k, $1525)
  • 1998 Mercedes E320 Wagon (MB Tex, Records, 166k, $2725)
  • 1998 Ford Explorer XLT (Auto, Leather, 140k, $575)
  • 1999 Toyota Camry CE (Auto, Cloth, Inop, $500)
  • 1999 Dodge Caravan (Gov’t Vehicle, 109k, 3.0L V6, $590)
  • 1999 Cadillac Escalade (Auto Leather, 212k, $2450)
  • 2002 Saturn SL2 (Auto, Silver, Power Pkg, 104k, $900)
  • 2002 Chevy Tracker (Auto, 4WD, V6, ZR2 model $2315)
  • 2003 Saturn Ion Coupe (Auto, Side Graphics, 120k, $2815)
  • 2003 Cadillac Seville SLS (Leather, Dealer Records, 125k, $2015)
  • 2005 Chevy Malibu Maxx (Auto, V6, 115k, $3670)
  • 2005 Ford Freestyle SE (Leather, 149k, $3170)

This is quite a list… and it reflects a few buying realities for the author. From the beginning you’ll notice that I avoid most older European vehicles and buy a bit heavy on the domestics. I also tend to stay under $3500 due to lower down payments ($500 to $1000) and favor vehicles that have leather interiors.
This is all purely intentional. Let’s look at the European side of the ledger first, or the lack thereof.

The European Sleds

Saabs, Jaguars, and VWs tend to be problematic at these lower price ranges, while Audi’s, BMW’s, Land Rovers and Mercs are usually far, far worse. When I was a ‘cash’ dealer I simply looked at the ownership histories and bought the ones that had the best combination of dealer maintenance and low wear regardless of the brand.

However when you finance a vehicle, you have to pay special attention towards getting vehicles that can withstand abuse and neglect. Not to mention having reasonable cost of repairs. In my experiences, most European models from the late 90’s and early 2000’s will become buggy high maintenance bastards. So I avoid them like the plague.

When I (rarely) buy one of the brands above, it will usually be a wagon model that has a very strong dealer maintenance history. Larger wagons in particular tend to have less abusive and more affluent owners. In days of yore, Volvos in particular lived up to this standard.

Volvos: Then and Now

Volvos used to be my absolute favorite for this ‘conservative’ combination. In fact Volvos and Subarus tended to make up nearly a quarter of what I sold when I first started. But the ETM issues of 1999-2002 combined with the transmission and electrical issues of more recent Volvos makes them far more chancy than in times past.

Sometimes making the wrong maintenance recommendations (lifetime transmission fluid) or chronic electrical and software issues can kill a brand. That’s Volvo in a nutshell.

The Second-Tiers: Why old Kias will never be like Hyundais

I am far more liberal when it comes to the domestics, Korean (except Kia until the most recent models), and the Japanese (except Mitsubishi, Suzuki, Isuzu, and certain Mazda models). The brands that I put in the proverbial parentheses I do buy… but just not in as large quantities as everything else.

To be blunt, most of these models I buy in smaller quantities because they have trouble selling and making the note. Weak trannies, a propensity for oil leaks, abysmal quality levels and an orientation towards ‘cheap’ low end trim makes these brands proverbial paperweights at the low end side of the range. As the old saying goes at the auctions, “Everyone wants a great deal on an eight year old Kia… until they actually drive one.”

One brief little story related to Kias. The funniest thing I ever saw at an auction came from an auctioneer who had always managed to get himself deep-sixed for shooting his mouth off at just the wrong time. Upon seeing a Kia rolling up to the block he bellowed out, “This was the shittiest car in America until they made the Daewoo!” Needless to say the seller flew into a rage and his time on the block didn’t last very long.

Domestics: Most GM and Fords, A Few Chryslers

The domestics pretty much fare down this way…

1) Rear wheel drive is more durable than front wheel drive
2) The bigger the engine, the greater the opportunity for longevity (Northstars and ealrier Chrysler 4.7’s are notable exceptions)
3) Certain powertrain combinations for FWD models will be near bulletproof, while others for the same exact model will be borderline garbage. (i.e. Tauruses, Grand Prixs, Luminas, Intrepids)
4) Never finance a domestic with a CVT. Always, always make those cash deals
5) The prior owner is the ‘pitcher’. Your job as a buyer is to inspect the vehicle, find out the type of owner they were, and why the vehicle wound up at the auction.
6) Older owners tend to be less abusive than younger owners.
7) Trade-in’s and repos tend to be the most abused. But that doesn’t mean you can’t buy a good one.
8) A well-kept leather interior is a big plus. Most consumers do research… and then buy with their eyes.
9) Orphan brands only sit longer when they’re ugly (Saturn L-Series, Olds Bravada, etc.)
10) If you can’t bother with giving a trade-in a good wash & vac, don’t even keep it at your lot. See #8 and ‘broom it’ at an auction.

Japanese Models: Why do the good become bad?

Japanese models come in two tiers. Toyota, Honda, Nissan (some models) and Subaru are in the higher tier. Why? Because they almost always sell for more money, wholesale and retail.

It doesn’t matter if the vehicle had engine sludge, or transmission issues, or a blown head gasket in the past. It doesn’t matter if the car is as new as the day the two ‘parts cars’ met and decided to kiss on their first and only date. The fact that this ‘new’ used car has the right name on it’s grille makes it highly attractive to the buying public. Same goes for Hyundai.

As I mentioned earlier I used to buy a lot of Subarus. But that changed around 2007 and now I buy no more than a few a year.

The same is true for the other brands and their more luxurious namesakes. 9 times out of 10 they will go for stiff price premiums at the auctions, and due to the lack of used car inventory at the sales, you’re likely getting a mediocre product at a premium price. At least when it comes to the lower end of the market ($3500 or less wholesale).

The other Japanese brands are seond tiers that are just hard to sell. A few models may go for premiums (Evo, Mazda 3, Mazda 5, etc) but those are simply not the ones you find on the lower end. Aerio, Reno, Verona, 626, Millenia, Rodeo, and Galants are far more common at the sales. If they have a nice upscale interior and a good maintenance history I will put them on my list.

The Bubble Market: Wall Street’s Next Rendezvous

Ironically, these same brands tend to sell well for the higher end buy-here pay-here lots that are looking for the newest vehicles. Why? Because they offer steep levels of depreciation along with healthy NADA values if they happen to be late models (2007 and newer).

Most folks are clueless about cars. A thick slice of them just want a late model vehicle at a monthly payment they can afford. Even if it’s for the next five to seven years. Then more times than not, they repeat the cycle.

Dealers who specialize in financing a bad credit customer with a late model vehicle will usually sell the paper to finance companies after a given time period. It will then be resold to a financial firm that doesn’t know any better, or will be kept if the assets and customers are perceived as less risky.

The Game… and how not to play it…

Thanks to the declining fortunes of the middle-class, there is a lot of money in this game. Sales at buy-here pay-here dealerships are up by more than 50% from only five years ago and the dirty secret of the modern day is that even the best names in the business now make their money by attracting the hard to finance customer to their ‘superstores’.

So for those of you in the market for a car… please do yourselves a big favor. Don’t buy a name. Don’t buy a low price. Don’t buy anything based on words… especially from a dealer who exchanges ‘convenience’ for a high sales price.

Buy the prior owner. Drive what you enjoy. Look at the history. Have it independently inspected, and then keep it up so that you don’t have to suffer the slings and arrows of outrageous sub-prime misfortunes. My series on buying a used car should help. Good luck!

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38 Comments on “Hammer Time: Some Buy Cars, Others Buy Names...”

  • avatar

    I’ve noticed a few lower mileage ’90s era Lexus LS400s in Craigslist. I know these are extremely reliable cars, but what about the cost of parts? Do they have any weak areas when they’re pushing 20 years old?

    • 0 avatar

      Any car of this age will be a maintenance ticking bomb. The power of its explosion is totally dependent on the previous owner(s) efforts made towards the upkeep.

      I would expect suspension, steering, exhaust, catalists, power windows/seats/mirrors, AC system etc. being on their way out. The more complicated the car, the more expensive and failure-prone it will be. The Lexus (given proper care) will last _much_ longer, but will bite harder in the end.
      Start with reading the LS forums and look for the posts from a high-mileage crowd.
      Just my 0.02c…

    • 0 avatar
      Japanese Buick

      Electronics and accessories are the weak points.

      I have a 1998 LS400 with 215K miles on it, that I’ve owned since 1999 and 48K miles. The engine, transmission, suspension, etc — all are still as good as new. The head unit for the sound system is starting to lose segments from the LCD display (called the hieroglyphics problem on Lexus forums) and the automatic climate control system is starting to develop bugs (when heating it blows hot air like it’s supposed to but when it’s supposed to shut off it blows cold air instead). Unscheduled repairs to this point: a headlight switch, an oxygen sensor, and an alternator.

      In other words, no major issues after 12 years and 215K miles, just annoyances.

  • avatar

    Catering to about 50% subprime/secondary outside financing and 50% internet cash business, my mixture is similar to yours, but more expensive ($4-7k) with lower mileage (under 120k on cars, under 140k on trucks unless its a Diesel or has eyes), and generally newer (’02+ i.e. ’10 MYs or newer’ for finance).

    I’ve found that most mainstream imports are a waste of time trying to even buy. Here in Florida, most go for far left of book with decent miles or have ridiculously high miles and STILL go for average because they’re being sent overseas (I assume). I’ve also learned that either a) no one cares about general upkeep on an ’02+ Altima or b) they’re just junk. Never had a good experience with one and shockingly tinny. I try to go for the ‘odd’ Japanese imports, i.e. Solaras, Mazda6s, Elements as they tend to be closer to a realistic wholesale value for whatever reason.

    I’ve also learned there’s no such thing as a good Chrysler 2.7. Period.

    And its funny you mention the L-Series and Bravada – I’ve always sold both at healthy profits. There is a clear following for these things (and other oddities) online. L-Series wagons are super-hot and ditto GMT-360 Bravadas. Azteks, too. In fact, I just took one in that I sold a year ago back in trade on an ’06 Santa Fe a few days ago and I already have several bites on it. Where were these people back when these cars were new?

    Go figure.

  • avatar

    The ’89-’94 LS400 have red light up needles for the instrument cluster that become very difficult to read once they go out, but there are people who can refurbish them.

    The early ’90s keyless entry tends to go too. The manual says the factory system’s range is about a meter or two away, so fit your own modern keyless entry. :)

    The power tilt and telescoping wheel might fail. It retracts out of the way when you prepare to exit, but my friend had the tilt fail on him with the wheel pointed up. It was like driving a bus. Eventually he got it back down.

  • avatar

    I find it funny how hard some people are on their cars. I take my parents vs myself and wife as an example.

    My parents have an 02 Xterra and 06 Altima, both with fairly low miles for their age (80k and 45k respectively), but tat this point botha are worse for wear. The xterra has had tranny issues and the interior is falling apart, and the interior bits of the altima aren’t faring much better. I’ve been in these similar vintage, higher mileage versions of these models owned by friends and they exhibit noe of the falling apart issues my parents’ cars have.

    OTOH, my wife and I have a 2010 Mazda 3 (we’ll be talking about the 00 Civic she had prior though) and a 04 RSX-S. Aside from the air vents on the Civic not doing great after 10 years and some rock chips from driving, both of our cars are completely fine. I beat on the RSX too, taking it to track days and autocrosses, and all it asks for is that I replace the wear bits and fluids at slightly shorter intervals, and it’s my commuter car to boot and holding up fine.

    I guess I’m just ranting, but I don’t understand how some people are so hard on cars and manage to break everything.

    Random question for Mr. Lang as a used car buyer/dealer though: As an enthusaist who does most of my own maintenance, what do you reccommend, being as I don’t have a stack of service records for when I sell the car eventually? Should I keep receipts for parts, fluids, etc?

    I don’t plan on paying someone to do the major 100-120k stuff coming up (valve lash, serpentine belt, coolant flush, and new plugs) aside from the valve lash adjustment, and stuff like brake flushes, pad changes, oil changes, etc are done at a more frequent rate due to my use of the car and anal-rententiveness about maintenance. What is the best way to communicate the level of care I put into my cars to a prospective buyer without dealer service records?

    • 0 avatar
      Steven Lang

      Always keep receipts and buy what makes you happy.

      Even if the receipts are your own, giving them to the next customer easily adds another $500 if you’re trying to make it a cash deal. It shows that you took the time to fix minor issues, which a lot of folks appreciate.

      • 0 avatar

        Every car I buy, new or used, gets a little spiral-bound notebook that I put in the glove compartment and log everything the car gets, which is 90 percent done myself. I guess the logbook is due to my aviation background. As I always sell private party, it really makes a difference.

      • 0 avatar

        I do the same with the spiral notepad in the glove compartment, a practice I inherited from my father. I have found it to be a strongly positive factor when I end up selling the car privately. The new owners always appreciate the obvious care I take of my cars and enjoy the physical proof of maintenance done when it was supposed to be done.

      • 0 avatar

        We have three older vehicles so it’s difficulty remembering everything. I have a small book in the glove-box detailing what I did and when I did along with the mileage even if the repair wasn’t 100% successful or was temporary.

        I have had no problems selling any of our used cars over the years.

        I find it better than the receipts which are often not that clear.

    • 0 avatar

      duffman13, could it be that Hondas are simply better than Nissans?

  • avatar

    It would seem that the buyer is being set-up to fail.
    Longer term financing on a high mileage car.

    I would be curious at your observations of how each party deals with this model as the car falls apart, the car is underwater, and the buyer starts finger pointing and falls behind on payments. Buyer, Seller, Finance.

    Myself, I would think a better business model is finding cream puff low mileage cars and ask a premium. This to retain a high reputation and make the subsequent over-pricing acceptable. I guess I think this way because I would feel guilty selling a ticking time-bomb.

    • 0 avatar
      Steven Lang

      Low mileage vehicles tend to have more ‘time bomb’ qualities than cars that are given regular use.

    • 0 avatar

      In my experience, mileage is all but completely irrelevant to how reliable a car is. All that matters is the maintenance. I have a 225K Volvo 965 in my garage that I would drive to California and back tomorrow, and be 99.9% certain it would make it with no issues.

      Having bought MANY older European cars, all they need is to have the maintenance brought up to date and they are just as reliable as new cars. Maybe more so, you can’t fix what isn’t there, and cars from 20 years ago were a whole lot simpler. And as I have said on this forum many times, the Internet is your best friend. You can find out what the common issues to look out for are on any given car in about 10 minutes. Then you can take preventive measures BEFORE the car strands you, or a simple problem turns into a not so simple problem.

  • avatar

    The city where I work has the area’s auto row. Most of the mainstream brands are represented along with a number of used car dealers. In addition to being auto row it is also the fast food row so I often end up cruising down it going to get lunch. Many of the lots are in the BHPH business. One of those is a Car Hop location. They have a number of locations in my area. I usually don’t pay too much attention to the cars lined up, but the Car Hop is near an intersection so I occasionally find my self setting in front of it or rolling by slowly. I noticed hey the front line is all US brands. So then I started looking at the other rows of cars and noticed hey I don’t see a single import brand car.

    That got my interest up, was it just this location due to the demographics of this particular area or something else, so I had to go to their website and see if I could check inventory. Sure enough they have it all online along with info about their business. So I searched by the entire state of WA and found that between all the lots and 100’s of cars, at the time, they had 2 Toyota products both ES250s, 1 Nissan a Sentra IIRC, 2 Hyundais, and 1 Kia. So it wasn’t just that one location but every one in the state and thus clearly part of their business plan. So I went a looked at the rest of their website and it quickly became clear why they were “buying the name”.

    So I ask you the B&B why does Car Hop only offer Domestic brands? Later I’ll tell you my conclusion.

    • 0 avatar

      Because here in urban, western WA the popularity of the foreign brands is so high that even the used-up ones go for crazy high prices, while depreciation on the domestics makes them a much better value proposition for these car lots.

      It my nabe near M$ headquarters, you have to really search to find anybody who drives domestic, unless it’s a full-sized truck (even the city uses prii for fleet vehicles). Now drive out 50-100 miles from the urban center, and the situation is quite different (a-ha, THIS is where all of the domestic minivans are!).

    • 0 avatar

      Perhaps it’s because their useless 18 month/18k mile warranty would cost them more if there were a repair to be made to an import. Also, with the depreciation already mentioned the imports would have a higher starting price and when CarHop doubles it people will feel they are getting screwed even more and walk. It doesn’t help that CarHop has a policy of not putting prices on the windows and won’t even deal with cash buyers.

      Just a guess though, since I tell every single person I talk to, who is car shopping, to avoid CarHop like the plague.

  • avatar

    Steven, what’s with the Subarus? Prices too high to get them, or reliability issues?

    • 0 avatar

      second the question…

    • 0 avatar

      Post 2004 non-turbocharged models should be pretty rock solid. I know mine has been.

    • 0 avatar

      head gaskets probably :( i hear it was finally solved around 2008 or 2009.

    • 0 avatar
      Steven Lang

      Prices too high due in great part from our proximity to North Carolina… and usually the ones that are sent to the auctions are there due to head gasket issues or the rear main seal.

      • 0 avatar

        Thanks! I’m in the early stages of shopping for a Freestyle replacement, and have found used Subaru prices to be most unattractive.

      • 0 avatar

        The way to buy Subarus is to go new. And the cheap way to do that is not much of a secret:

        – Join one of several outdoorsy organisations. ‘Leave No Trace’, American Canoe Association, and some others. This gets you ‘VIP’ pricing, which is 2 percent behind invoice, no haggling.

        – Get the Chase/Subaru credit card. Three percent of whatever you charge becomes “cash” towards anything sold through your Subaru dealer, except used cars. New cars, lease down payments, parts, accessories, maintenance, tires… there is a $500/year limit… Rebates expire after 4 years. Have the wife get a card, too.

        -This only works if you dont’ carry a balance.

        In the past, the GM card was a great way to buy Toyotas in drag (Prizm, Vibe) but those are no longer available. I could buy a new Silverado regular cab for $14k + tax if I wanted to right now. The pressure to sell new cars is tremendous, and there are ways to make that work for you.

        Stellar credit is a big help.
        Cheers -Mathias

      • 0 avatar

        Too bad there aren’t any Subaru’s I would want to buy anymore. I will be keeping my 2006 Legacy Wagon for a while longer.

      • 0 avatar

        Thanks! Would consider the current Forester, otherwise inclined to wait a couple of years until durability and repair cost/availability sorts out on the CVT.

  • avatar
    Educator(of teachers)Dan

    1) Rear wheel drive is more durable than front wheel drive
    2) The bigger the engine, the greater the opportunity for longevity (Northstars and ealrier Chrysler 4.7’s are notable exceptions)
    3) Certain powertrain combinations for FWD models will be near bulletproof, while others for the same exact model will be borderline garbage. (i.e. Tauruses, Grand Prixs, Luminas, Intrepids)

    Thus Panther love and 3800V6 love.

    9) Orphan brands only sit longer when they’re ugly (Saturn L-Series, Olds Bravada, etc.)

    Called my parents last night (both 56 years old) and my Dad’s been looking for a replacement for his late build S10 based Blazer. (Mom likes the high up seating of SUV/CUV if it was Dad’s choice he’d be driving a big sedan, with a small amount of sportiness, like a Bonneville.) So he brought home to her to try out a LOADED 2007 FWD Pontiac Torrent. First car he’s brought home on his quest for a “new used car” and she’s in love, especially with the heated leather seats. Amazing, it usually takes him bringing home 15 cars before she likes something.

  • avatar

    “2) The bigger the engine, the greater the opportunity for longevity (Northstars and ealrier Chrysler 4.7’s are notable exceptions)”

    What is it about the earlier 4.7L Chrysler that makes you shy away from them? What years also?

    • 0 avatar
      Steven Lang

      Sludge issues. Actually the first generation Durango is a poster child for horrific durability with engine, transmission and eletrical issues. The engine was also put into the Grand Cherokee, Dakota and Ram pickup as well.

      Page 2 of this discussion offers tons of links that just scratch the surface of the sludge issue.

      I don’t buy newer Chrysler trucks and SUV’s that have the 4.7L so I can’t comment on the most recent 4.7 Liter vehicles. I do buy those that have the 3.7L and recently bought a 2004 Dodge Ram ST regular cab with 97k for $2000.

      I’m going to have it driven for a while before retailing ti just to make sure everything checks out. That engine is based on the 4.7 Liter… and obviously the price I bought it for more than likely reflects early sludge issues.

      But I didn’t see any… so other than the seller cleaning out the cap and changing the oil, I’m hoping for the best.

      • 0 avatar

        I owned a 2002 Ram Quad cab 4×4 with the 4.7 and if I remember correctly that motor only put out 225hp; totally inadequate and very thirsty. As hard as it was working to move that truck I cannot imagine that the motor would hold up well long term.

        OTOH, my 05 Durango with the 5.7 hemi is great and gets 21+mpg on the highway.

    • 0 avatar

      Our 2003 Dodge with the 4.7L has been absolutely bullet proof. The transmission also. It’s been to the dealer for a minor warranty item once only. The 4.7 came out in 1999. So I’m guessing 99 and 2000?

  • avatar

    I can understand buying cheap cars and flip them as a business. What I don’t understand is why would an individual buy one cheap car, when he has the resource to buy a better one?

    For instance, I would never touch a 20 year old Lexus LS. If I want a nice Toyota sedan and don’t want to pay the new LS price, I will just buy a new 2012 Camry. The overall comfort and ownership cost would be better.

    • 0 avatar

      You said exactly what I was thinking when I read this last night, but couldn’t get my thoughts straight. In my case, insert “Impala” instead of “Camry”!

    • 0 avatar

      There are purposes to buying cheap cars, even with good credit and income. Examples are for young drivers, driving in high vandalism/fender bender areas, and station cars in suburbs.

      For somebody who can buy a new (or near-new) car and stick with it for over 100,000 miles, the cost of ownership is reasonable and well worth the lack of hassle to me.

    • 0 avatar

      It’s very true that a 2012 Camry or even a 2000 Camry XLE can be much more comfortable and quieter cars than a 1992 LS400 would be today.

      But it’s not really something that can be rationalized. Older cars have charm that not everybody appreciates the same way. I guess it’s part of being a pistonhead with Panther Love and W-body Love.

    • 0 avatar

      The two cars we own now I bought new — ’03 Sienna, ’07 Vibe; base models.

      But I prefer buying and driving older cars. Ten years old, no leaks, little or no rust now you’re talking. For one thing, nothing to worry about. Scratches, dents, whatever. I keep the inside clean, wash the outside once a year whether they need it or not, done.
      Park ’em by the water’s edge while I go canoeing, no worries. Liability-only insurance.

      It probably makes a difference that my ‘commute’ is 5 miles roundtrip and I ride my bike to work year-round.

      New cars, if you buy ’em right and buy the right ones, are an amazingly good deal. But hoopties is where the heart is for this kid.

  • avatar

    4) Never finance a domestic with a CVT. Always, always make those cash deals

    Does this suggest that all CVTs are generally less reliable than standard autoboxes? I have never been able to get a straight answer on this. Or is this just a comment on the saleability of used domestic CVTs?

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