MOM, WHERE DO CARS COME FROM?
Precision Auto
Diagnostics, Inc.
MOM, WHERE DO CARS COME
FROM? First of
all, a fair warning: here is no place for political correctness
since it only prevents a thought from being delivered. One
authority on Internet Marketing - whatever that is - advised
that any business should identify its audience a.k.a. customer
base, and we have done that long ago but - and I have to admit
it - had no guts to implement that knowledge until now. If a
visitor gets offended by information and/or views expressed
here, they are not a member of our audience. Also, some
individuals or institutions may find the contents of this
article harmful to their bottom line... too bad.
Now, it's time to get to the subject.
Really, where do they [cars] come from? New cars come from
the factory, and this is a subject of a separate article - at
this point we are concerned about used - or "pre-driven"
vehicles. Here is the list of main sources for a consumer. : - Private
seller
- New Dealer
- Used Dealer
- Leasing
Company
- Credit Union
- AAA or some other
consumer club or organisation
- Bank Sales Event
The above list looks simple but in reality, all items are
interconnected in a pretty complicated, and sometimes weird way.
For example, a New Dealer takes a vehicle as a trade-in, and
decides that they'd be better off by selling it at an auction
because they found major defects that would be too expensive to
fix. A used car dealer buys that vehicle hoping to sell it with
profit to a consumer. Finally, somebody buys it using a bank
financing only to find out that it - the vehicle - needs major
repairs that may cost more than the value of that vehicle. In
the worst case-scenario, the buyer gets broke over the whole
"deal", and the bank repossesses the vehicle, and either
attempts to sell it at its own "selling event" or sends it back
to the auction... You got the picture. You'd be amazed if you
knew how many vehicles get shipped all over the country from
dealer to dealer, and auction to auction. In other words, there
is a vicious circle of resellers - and each "node" has to make
profit at the expense of the "end user", and once that happens -
the circle gets broken under centripetal force. This information
may seam like useless from a consumer's point of view but each
source in the list above is somewhat different, and may have
advantages AND disadvantages.
At one point, we thought that entities like Credit Unions and
Consumer Clubs like AAA work on behalf of their members, and,
therefore, could be a better place for a consumer to buy a used
vehicle. We contacted many of them including Colorado
AAA offering our services to their members, and you know
what? All of them were categorically opposed to our offer. More
than that - they were clearly offended.
You may conclude that I am upset simply because our company lost
a lucrative piece of market but I can assure you that it is only
part of the story. The fact is: we do sincerely believe that
our service is needed to our customers, and is absolutely
necessary for most used car buyers who want to avoid major
disappointments.
The question we asked was "why?". Why would a non-profit
organization like a Credit Union reject our offer without any
consideration? The subsequent question was: where do they get
the vehicles they sell at their "sales events"? The answer was
quite obvious - they come from the dealerships. We did some
simple research - compared the price of a randomly picked Credit
Union "special offer" with the industry standard Blue Book value
for the same vehicle in excellent condition. Imagine our
surprise when it turned out that the "special" price exceeded
Private Party Blue Book Value more than twice -
 ">http://www.anti-lemon.com/articles/WhereToBuy/Graphics/CCvsB
Bprice.jpg">
A completely unfounded assumption that a friendly Credit Union
would guard their members' interests, makes a consumer less
defensive, and easyer to "work" with.
After dozens of phone calls to Colorado AAA, we were finally
re-directed to the person in charge of auto sales. We sent all
the information, and started the standard waiting period... Two
weeks later, we called to find out if the consideration process
was on its way, and it turned out that it was not.
- "I don't need it" - said the dignitary-in-charge. - "You or
your members?"
- "Are you going to argue with me?". That was a typical dialogue
with the Credit Unions as well... In other words, based on our
experience with AAA and numerous Credit Unions, we came to the
conclusion that their management considers member-funded
organizations their personal property that they can run the way
they feel appropriate, and their members' benefits is a
secondary factor at the best.
Now, can we conclude that these officials charged with taking
care of the members of their respective organizations take
bribes from the dealers, brokers, etc.? In the Court of Law, the
available evidence would unlikely guarantee a conviction but the
above assumption explains all facts perfectly well... What that
means in practical terms is: nobody out there - neither
"consumer advocates", nor banks, credit unions, or AAA - is in
business of protecting your interests except us, and not only
out of goodness of our heart but due to the nature of our
business.
If I were on the market for a used car, I would like to know who
- if anybody - checked it, and what that person's qualifications
were. Let's look at the differences between various sources used
vehicles come from.
BANK SALES EVENT
They repossessed the vehicle, and are willing to get rid of it
as soon as possible with minimal losses. On the positive side,
you may get a little better deal, and possibly somewhat
favorable financing terms. But don't expect too much - all loans
are insured, and the bank is certainly less than desperate.
On the negative side, a repossessed vehicle is more likely to
be neglected by the previous owner due to obvious reasons. Also,
banks are not in auto business, and there will be no
pre-purchase inspection other than that provided by a car wash.
PRIVATE SELLER
This one is by far my favorite. First of all, a dealer
considers a minimum profit of $1,200 his birthright. With a
private seller, you will almost always get a significantly
better price. The vehicle will not be sprayed with cleaner all
over, and that makes all defects easily detectable. There will
be no quick fixes applied to the problem areas.
On the other hand, there'll be no pre-purchase inspection, even
a dealer-type symbolic one. There'll be no financing arrangement
either but dealer's Finance Manager is the last person I would
trust. The only other disadvantage when compared to a dealer I
can think of is a lack of a trade-in option. Selling your old
vehicle vs. trading it in also has its advantages and
disadvantages. If you sell it yourself, you definitely get more
for it. On the other hand, you do not pay taxes on the trade-in
value. And finally, it is a matter of convenience: you bring
your old car in, you drive another one out - a matter of a few
hours, some frustration, weird sales games...
DEALER
Used vs. New. New car dealers have service department. No
exceptions. That means that at least limited technical expertise
is available, and may - or may not -be applied to the vehicle in
question. Some Used dealers have a shop as well but their
technicians receive no training, and their overall qualification
is usually much lower than that of a New dealer.
Now, let's talk a little about an initial inspection of a
vehicle purchased by a dealer at an auction or taken as a trade.
This important function - evaluation and purchasing - is
performed by a Used Car Manager, or a similar official. This
individual is not a technician. As a matter of fact, I've been
trying to figure out what their expertise is in for the last
twenty years, and so far with not much success. All they are
capable of is driving a vehicle around the block, and checking
its book value. It's amazing that someone doing this not quite
complicated job can be paid $100K or more a year... There must
be something else, don't you think? And that something is the
ability to sell a worthless vehicle to an unsuspecting customer
without loosing a good-night sleep... Well, let God be their
judge. Just a couple of days ago, while doing an inspection at a
used car dealership, I was approached by their version of Used
Car Manager who asked what I look at to determine if the engine
is in good shape. No comments needed... I hope.
Once the vehicle is acquired, and if a dealership has a shop,
some kind of an inspection is performed. Note: if there is no
shop - the case with most used car dealerships - the vehicle is
cleaned, and put on the lot as is. Otherwise, their technician
does a visual inspection, and presents the list of found
deficiencies to the Used Car Manager who determines what gets
fixed, and what - washed and polished. Important fact to
remember: every penny they spend on repairs or preparation is
taken our their profit, and, therefore, they do an absolute
minimum. For example, if brakes are worn out, they replace the
pads but don't machine the rotors, if there is a leak, they make
sure it gets steam-washed rather than repaired...
It's not that they are bad people - they just follow the rules
of the trade. According to my experience - very few, if any,
used vehicles come free from significant - i.e. requiring
immediate attention - problems. As an illustration, look at
these pictures
">http://www.anti-lemon.com/articles/WhereToBuy/Graphics/recen
tTruck.jpg">
They depict a truck - and its engine - that was sold 200 (!)
miles ago. It does not look well even to a mechanically
challenged. It's probably worth mentioning that the selling
dealer refused to take care of it since the vehicle had been
sold "as is", and the Extended Warranty the owner had purchased
for $1,700 refused coverage since the failure was a
"pre-existing condition". At that point, the lucky consumer
found himself with two loans on his hands - one for the vehicle,
and one ($3,200) for repairs. A lesson worth learning...
LEASING COMPANY
Lease is an option inappropriate for most buyers, but that will
be a subject of another article. For now, let's concentrate on
advantages and disadvantages of buying an off-lease vehicle. A
major advantage of this option is that leased vehicles are
usually in better than average shape. The leasing company has
already charged the "lessee" an arm and a leg, so theoretically,
you may get a decent deal. Otherwise, it's about the same as
buying from a bank.
CREDIT UNION
I personally see no advantages. There is just one more
middleman on top of a dealer. It certainly does appear that some
shady deals are done at your expense, and their members'
well-being failed to make their list of priorities. Credit
unions provide financing but it apparently does not matter
whether you are buying from them or from somebody else. Also,
there is no such thing as a mechanical inspection, warranty, etc.
AAA, CONSUMER CLUBS, ASSOCIATIONS, ETC.
Quite frankly, there are no advantages I can think of - just
like with a Credit Union.
Conclusions:
- Free cheese can be found in a mousetrap exclusively
- If there is a possibility of conflict of interests - it [the
possibility] usually is materialized
- Each trade has its
more or less dirty secrets, and "professionals" are hard to beat
in their game without another professional in your corner
- No matter where your next used car comes from, a
professional inspection is a must!
By Leo Russ
Operations Manager
Precision
Auto Diagnostics, Inc. Web Site
Email: Contact
the author
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About the author:
Leo Russ
Operations Manager
www.anti-lemon.com" target="_blank">Precision Auto
Diagnostics, Inc.
Email: Contact
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Written By: Leo Russ
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