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Used Car Buying, or Madness Has its Place | Wired Cola

Used Car Buying, or Madness Has its Place

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(Apologies to Larry Niven.)

TLO and I just bought a car. Through a torturous process*, we concluded that the Nissan Versa hatchback was the least worst car that will meet all of our needs and our most fervently expressed wants. Because we're on a budget and can't afford new-car smell, we're looking at used Versas.

(What were those wants and needs? Four doors, so we can carry three adults in comfort. Automatic transmission for TLO. Reliable. Very small, so it wasn't harder to park than our New Beetle, but at least as much cargo space as the Beetle. Air conditioning. And within those parameters, I wanted to get a quiet, somewhat luxurious car, and said I'd like keyless entry and maybe cruise control).

The Versa is not a car where you have to wait for weeks to see one come up for sale. I think Craigslist averages something like 3 new Versas a day posted. Half the dealerships in the city appear to have one on their used lots, and vast rafts of the 2007 models are coming off 3-year leases. They're a commodity, graded and priced with impressive fineness. Our four-figure budget would let us buy a Versa meeting these specs with relative ease. The default price for a 2007 Versa S hatchback with automatic transmission is $7000-10000, assuming no accidents, and the range otherwise depending on mileage and options. The 2008-2011 models go for more, but mileage is more important than age. Note also that there's a stripped-out trimline that is sedan-only (we never looked at the sedans), and an extra-fancy SL model. More on that later.

We went out looking, and saw a lot of Versas at a lot of places. By the time we were done, we had checked out private sale cars, rebuilt cars, curber's cars, and many car lots, ranging from trade-ins at new-car dealerships to lots attached to repair shops.

Here's my rough guide to buying a used car in BC, and what to look for.

Starting Out

Very late in our search, I discovered the Tips for Buying a Vehicle page at the MVSA site. The Vehicle Sales Authority is the governing body for car dealers in BC: if you want to hang up your shingle, you have to be a licensed member. The tips page has generally good advice about looking for a car (set your budget...) and BC-specific details (regulations car dealers must follow, lien indemnification from car dealers, ICBC and Carproof history searches, and much more). Just go read that page, and heed it.

Choosing Cars

We exploited the generosity of car dealers in test-driving used cars, largely to figure out which ones we liked and disliked. An Aveo would have met our theoretical needs, but compared to the Versa they're buzzy, tinny boxes. Not even a loaded model enticed us. The late-model Focus we could afford had a dated interior, and wasn't as nice as the Versa. The Mazda 3 was sweet, but for that and the Honda Fit, the prices were a tad higher than for comparable Versae (and those two sportier hatches are best served by their manual transmissions). We looked at the tiny cargo area in the Yaris (not to mention the public-transit interior) and moved on without a test drive.

I ignored my father's advice to test a new Versa just to benchmark how these cars were supposed to drive and work, but it was good advice. Had I had more time and less of a feel for these cars (I drove 5 different used Versas by the end), I would have done so for sure.

Looking for Cars

In Vancouver, you're going to be on Craigslist a lot. You'll sort that list up, down, and sideways, and refresh twice a day. I went so far as to search in Victoria (where Kijiji is also popular) and Kamloops, too. Nothing exciting turned up in either place, but it depends on the car you're looking for

My friend Ryan (no relation) has bought no less than five used cars in the US, and he has that down to a science. He praises the depth of selection, the considerable price differences on some models, and the virtues of rust-free California cars. I did search the US Craigslists on the coast, but the deals he was finding on late-model BMW X5s were not there for late-model Versas. I don't have a good theory about this, except that each car appears to be cheapest where it is most common, owing to the big difference in gas prices on either side of the border.

I searched for lease takeover deals, but for a cash customer the deals don't seem that great. As far as I can tell, the typical attraction of a lease takeover is the same as a new lease: deferred financial obligations. In both cases there's a financing penalty, mileage and wear restrictions, and the ultimate financial outlay is higher.

I had assumed lease-takeover cars would have more money on the hood or more desperate sellers, but there is a class of lease-qualified buyers for whom low monthly payments are a plus, despite that big bubble payment at the end.

My father-in-law got us a contact with a licensed dealer who attends auto auctions. He offered to buy a car to order at a dealer-only auction for about $750 over his cost, and that was so attractive we asked him to do so. But before the next auction chance came up, we found a suitable car elsewhere. I can refer you if you're interested.

Private sales were less common than I expected, and Craigslist is polluted with highly dubious "by-owner" sales that are probably curbers. I looked at a VERY nice Versa in Surrey at a private residence, but the combination of 2 owners in 8000 km and a Rebuilt title (it sustained damage that cost more to repair than the value of the car) made us walk away quickly, and I'm fairly sure it was being curbed.

I also phoned one "private sale" ad where I talked to a nice young woman who explained that it was indeed her car, and it had been in a minor accident that caused it to have a rebuilt status (!?!) but that her dad, who was a mechanic, was so sure the work was done right he was offering a personal 3-month warranty on the car through his business. Um, yeah.

I also saw at least one actual private car (and there were a few I saw on Craigslist but never heard back from sellers about, presumably because they were already sold), and couldn't come to terms with the seller, mainly because it was a well-optioned car and I wouldn't offer anywhere near book value for it.

In the particular case of the Versas we were looking at, a lot seemed to be cars at the end of 2-3 year leases. These cars are returned to Nissan Finance (or similar), and are sold via auctions or direct sales open only to licensed car dealers. The best of these Versas (loaded models with all the trimmings) are often at Nissan dealerships, presumably because they're cars with good margins, easy saleability, and (I think) a better chance of being financed.

The car we ultimately got was from a small used-car dealer.

Financing, "Loaded," and Other Sins

Financing deals (lease or loan) are a major source of income for some dealers, new and used. There's nothing magical about this: all finance agencies intend to turn a profit on their deals, and if the car seller can link a financing deal to the sale, they can collect a commission for the car sale, and a commission for the financing. Easy financing also widens the number of people they can sell cars to, reduces the psychological friction of paying so much for a car, and opens up some minor but potentially lucrative tactical advantages to the seller during price negotiations (similar tactical advantages can happen around trade-ins). I don't know if BC car dealers are allowed to act as financing services as well, but in some jurisdictions, the very bottom of the finance market consists of "Buy Here Pay Here" lots, specializing in low-priced transportation with low weekly or monthly payments, usually going out to customers who could not otherwise afford a car or get credit. Stephen Lang offers an interesting, detailed dealer-side perspective on the BHPH market.

My point? As a cash customer, certain finance-friendly cars are less available, and I'm a less lucrative customer for a lot of dealers. That's not a complaint, but it was interesting to discover. On the upside, no financing costs, so we paid less.

"Loaded" was the most comically abused term I saw in used-car ads. I can accept at this point that "mint", "perfect," "clean," "must-see," and numerous other claims on the condition of a car are functionally meaningless. But I assumed that "loaded" broadly meant cars that had a large number of the available options on that vehicle, whether because the base package (as with many luxury cars) already had lots of typically "optional" features, or because the car was notably up-optioned from the base model.

The Versa hatchback ads I saw were willing to proclaim "loaded" on the thinnest of pretexts. The lowest "S" trimline has a radio with CD player, but manual windows, manual locks, and no air conditioning. Most buyers opted for the "Value" package that added A/C, power windows and locks, and keyless entry. here's a Craigslist ad for a "loaded" Versa (it may have disappeared by the time you read this). That is a Versa S with the Value package (I can tell by the interior and exterior photos). Here's the features that it doesn't have that a fully optioned Versa SL could have: fog lights, upgraded stereo with Bluetooth connectivity, 6 speakers, MP3 auxiliary input, upgraded interior with extra storage compartments and different seat fabric, cruise control, leather-wrapped steering wheel, CVT, moonroof, steering-wheel radio controls, navigation system, and a few other bits and pieces. (I can't tell if our subject car has ABS or not).

I don't think that car qualifies as "loaded."

I Lose My Mind

TLO and I had established a budget, and soon we zeroed in on the Versa as our target car. At this point, I lost my mind. I have an excuse or two.

I love driving stick-shift cars. I learned on both stick and auto, I've ridden motorcycles, and I've operated manual transmissions on everything from a 1000cc Hyundai Atos to a 5-ton moving van. TLO? Not so much. I accepted that a transmission with no clutch pedal was part of the deal, and while the Versa had many merits, one feature that interested me was the CVT automatic on that car. I won't bore you with the technical details, but it's a variant form of an automatic transmission that is very efficient and does things that amuse nerds like me. If I had to have an automatic, I could live with that one.

But what I didn't know then was that not all Versa automatics are CVTs. It is an option reserved for the niftier SL trim, while S models only get a conventional 4-speed automatic. When I found this out, I drew a line in the sand that we were going to get an SL, and one with cruise control, too (I use it a lot, TLO never does).

We couldn't afford them. The SL commands a premium of $1000-3000 on the used market, depending on other options. The ones in our budget range were all rebuilt write-offs or some other kind of hopeless case. What followed was a 2-week low-level argument punctuated by my desperate attempts to find an SL within our budget. Reasonably enough, I lost. We bought an S model with no cruise control, because it was a solid car that met our needs.

The meta-point is that car purchases are stressful. The only other time we spent this much money was when we bought our previous car. We aren't likely to buy another car for at least five years, if not more. In that circumstance, it's reasonable to fight over details and differences that cost a lot and will be with you for many years. It's still not much fun, though.

Check that car

Once you know what car you want, the test-drive and viewing process is about making sure the car is what it purports to be. For most people, this involves as careful an inspection of the car as you can manage, at the bare minimum testing all the interior and driving controls for proper operation. Seriously: adjust the mirrors, windows, vents, try all the climate control settings, and so forth. That will help eliminate some vehicles from consideration, or at least leave you knowing what you're buying.

For most buyers, if the car looks right and drives right, the next step is a mechanical inspection. You can arrange this through your own mechanic, if you have a regular one. BCAA also offers a pretty thorough mobile inspection service (they come to the car) which I have previously used and liked. It's available to members and non-members, and while it's not cheap, it can be very worthwhile.

That said, I didn't get them to inspect this car. After inspecting it and driving it myself, and having my picky father go over it (we looked in the spare tire well for evidence of collision repairs, that sort of thing), I was convinced the car was free of substantial faults, and it isn't very old, so I'm not worried about anything other than routine maintenance requirements typical of a car of this age. I knew (from the Carproof records and the owner's manual folder) which Nissan dealer originally sold the car, and I got lazy about one thing I should have done: contacted them to see if I could get info about maintenance records.

ICBC used to be the usual outlet for checking for liens and accident claims, but now they're pushing a service called Carproof which offers a cross-Canada and US search for the car history. It's pricey and offered in three baffling tiers, but many dealers will have an already-printed copy of the Carproof for vehicles on their lot, as a courtesy.

I got a bit freaked out at the last minute while looking at the car we bought: the Carproof printout the dealer showed was from October 2010, and it didn't show lien info. In retrospect, liens were not an issue, as VSA-licensed dealers (ask to see their license...) are required to indemnify the car as lien-free, and their licensing agency maintains an insurance pool against liens and other car-buying related financial losses. As for the report's age, therein lies a tale.

Seeing the old Carproof, I asked the dealer when they had received the car, so they could prove the Carproof was not hiding any owners or incidents between the time it was done and the time the dealer took possession. He showed me the paperwork, and indeed, they'd had the car since October of last year.

Hm!

Dealers don't like to hold onto cars for months. It's bad business and a bad use of their capital. Very much by accident I stumbled upon information that helped me a bit at negotiation time. Keep that in mind.

After all this, I was confident the car we were looking at was accident-free, not in need of immediate repairs of any sort, and not grossly abused beyond normal wear and tear (which was pretty minimal, except for some cosmetic keying-style scratches front and rear: the kind of damage you can live with or detail out).

The Negotiation

People assume this is the most stressful part of buying a car, and in a way, it is designed to be that way. There are hundreds, if not thousands, of dollars on the line for both parties. If you want to feel sorry for the salesman, consider this: for you, the likely negotiated price differences are a difference of several percentage points on the car's final purchase price. For the salesman, the hundreds you're beating him down on amount to huge swings in his personal commission on the car. Your dickering can easily double or halve his expected results. Nice, huh?

Enough pity. Let me explain what you need to do to simplify the negotiation.

-Know your limit. Have a set, final price you are willing to pay for the car well before you start bargaining. Calculate the taxes on that price, so you understand exactly what size of a cashier's cheque you'll be getting from the bank later. Don't forget to budget for car insurance, one way or another. If you have a reasonable price, and the seller can't meet it, walk. There are always other cars, or other days to buy that car. There's an argument that if you don't walk out at least once during negotiations, you didn't find the seller's true limit. If you're going to finance or whatever, do the calculations at home to figure out what kind of interest rates and monthly payments and down payments you can swing, and use that to work back to how much you can afford to spend, in terms of sale price, on the car. This applies even if you're leasing. Do these calculations yourself, at home, before you negotiate the price. If you don't know how to do the calculations, ask a friend who does, or check with your bank. They'll be happy to lay out typical loan situations, and what they can offer you the money for.

-Be polite. The salesman is trying to sell you this car for as much as you will pay, but that's his job. Do not take this process personally, and understand the details. Removing emotion as much as possible will simplify bargaining.

-Establish the asking price. Most dealers charge a "documentation fee" on top of the asking price, and a new car's sticker may include such fanciful charges as delivery, prep, or whatever. I don't care, and you shouldn't: get the seller to lay out in gory detail what their true asking price is, before taxes. As long as you understand where that is in relation to your personal price limit, you can now negotiate with great clarity and little or no math.

-If you are planning to finance, lease, or trade-in, gently explain to the seller that you need to discuss the car's actual price before you determine those other terms. They may wish to draw you into a four-square model or similar, where you are simultaneously discussing monthly payments, trade-in, interest rates, down payments, and...actually, you won't be talking about the sale price, because the dealer wants to demonstrate that you can happily afford the monthly payments they're offering without regard to whatever the pesky asking price is. Result? You get a monthly payment you can manage, a trade-in that sounds reasonable, and you pay full asking price for the car. In other words, these models are essentially a psychological trick to get you from thinking about any of the numbers that are actually important to the dealer. Subvert it by explaining that you want to talk price, first, and be firm until you get your way. You will, and if for some reason they refuse to do it your way, leave a phone number and walk. You'll get a phone call shortly.

I didn't have any complications, so I went straight to the kill with the seller: "is there any documentation fees or whatnot?" It was $199. "So, your asking price for this car is $9000." ($8800 asking plus doc fee. Taxes on top, but I already had a calculated before-tax drop-dead price. And yes, I gave the seller a buck. I'm so generous). Thus we knew where we really sat. I had set an opening offer in my mind that related to the posted asking price, so I ignored the doc fee and laid it out: $8000. The seller looked like I had punched him in the gut.

That was a good sign, I guess, though always remember that you're the fish in these negotiations. I don't mean that in a bad way, simply that a car salesman has done this before, lots of times. That's just how it is. You've at least taken them outside of their comfort zone by starting negotiations on true cost terms, which is useful because it strips the transaction to its simplest and most vital element.

After that, we engaged in a spirited and surprisingly brief negotiation. We both knew (and he explicitly mentioned) that the car had been sitting there for months, and that was bad. He repeated, several times during repeated offers and counter-offers that "I'm losing money on this car!" This may or may not have been true (I'm inclined to believe him), but it wasn't my part to care. After the third repetition of that gambit I replied "yes, but I'm giving you a chance to get rid of some dead inventory." We pushed numbers back and forth, we moved numbers around, we were $50 apart (and already well below my "buy" price) and as he said "$8550" for the third time, while holding out his hand, I said "If you'll do this deal for $8550, you'll do it for $8500." And that's what the car sold for.

You don't have to be good at bargaining. You don't have to banter with the dealer. You just have to set a price, politely stick to it, and be willing to walk away. It works, it's easy, it will not take that long. Don't be thrown off by "I have to speak to my manager," or whatever. This is a cooling tactic (in almost all cases, the salesman knows exactly what the numbers are; the manager or whatever is just playing a role in a little drama enacted for your benefit), and you can either ignore it (update your Facebook status or something) or go for the extra-fun counter of, "wait, you don't have bargaining authority on this car? Then please, let me speak to your manager instead. Because I do have authority to make this deal, and I need to speak to someone who does."

If anything, you're making the seller's life easier. They may not like it, but once they understand the nature of the deal, they still know what the numbers are; you're just short-circuiting the bargaining process and dodging some of their more effective upselling tricks.

-Once the asking price is established, move on to the trade-in, which will be done on the same terms. Finally, you can talk financing. I don't have any advice there, except that you probably shouldn't finance a vehicle.

We ended up buying the car from Leo at Kent Auto Sales, 901 Brunette, Coquitlam. Note that this site previously hosted a much more gimcrack car dealer, while Kent has only been there for a month (so some of the more brutal reviews you read online don't apply to Kent but to the previous tenant). Leo sold us an honest used car, the process was decent and decidedly non-sleazy, and he was patient and courteous throughout my four visits to look at the car and subsequent hardball negotiation. I would recommend him to anyone, though the 2005 RX-8 he has on the lot at $12,500 probably isn't as good a deal as it looks. But, oh, did I want it.

One more note: TLO and I talked bargaining tactics, who would do the negotiating, and even whether she would come with me to the dealer during bargaining. As part of this spirited discussion, we walked through a mock negotiation of the car's price. It wasn't intended as such, but it turned out to be a useful rehearsal for the real thing.

Hilarious Final Story

We looked at several used cars at Metrotown Mitsubishi, even going so far as making a lowball offer on a Versa there (not accepted, we walked away). The young, probably quite green salesman who showed us around drove each car we tested off the lot to a nearby supermarket parking lot, where I would get into the driver's seat for a short test drive. As we stepped out of a Versa, I noticed a strong, funny, sweet smell (some sort of coolant leak, of course). Maybe the salesman caught my funny look or couldn't ignore the smell, but he smiled, gestured at the supermarket and said, "mmm, groceries!"

It was such a hapless, shameless line that TLO and I have been passing it back and forth for a week as a code-phrase for unexpected smells or inept diversionary tactics. Feel free to use it as needed.

(I couldn't come up with any response better than a weak "that's not groceries," before getting into the car. A coolant leak wasn't a straight-up disqualification of the car: some are easy to remedy, and you can make such repairs a condition of the sale, but some are hard to track down, and in any case it's not a good sign.)

*at one point, we test-drove a Chrysler PT Cruiser convertible. We were that nutty. We also test-drove a Chevrolet Aveo, Mazda 3, and a Ford Focus. We didn't need to test-drive the Yaris after we opened up the hatch and saw the nonexistent cargo space.


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