excerpted from Strategies for Smart Car Buyers
In our eternal quest for deals on wheels, we decided to take a closer look at three types of used cars:
- "Program cars," also known as finance, factory or executive cars
- Used cars from rental car lots
- Used cars with salvage titles
Can you get a good deal from these sources? Will they make solid, dependable transportation? Let's look at them one at a time.
Program cars have been owned by the manufacturer and given to employees for a short time to use for company business. The idea is to have a Ford employee, for example, drive a late-model Ford to advertise the company's product. These cars are maintained by the factory and usually sent to auction before the odometer turns 10,000 miles. The cars are sold to Ford dealers at closed auctions and then put up for sale on the car lot and advertised as "program cars."
"Dealers like these cars because they can get them at low prices and then sell them at a good profit," one insider told us. "Besides that, program cars always get the service they need because dealers can work on them in their own shops."
These cars can be a great deal for the average buyer. They have been well-maintained, so in essence you are buying a nearly new car with no worries about mechanical problems. Furthermore, some dealers might extend the warranty for the full term, or at least you will be able to drive it for the balance of the factory warranty.
So how would the average consumer go about buying a program car? Just call used car dealers or check the ads. "Dealers are proud to advertise program cars," one expert said, adding, "The deals are there."
Knowing what to pay for the car can be a problem because you have no idea what the dealer paid for it. However, you should never pay more than the invoice price for a comparable new car. Or you could consider assigning a certain value per mile the car was driven and deduct that amount from the invoice price. For example, lease cars that are over mileage are charged 15 cents a mile, a reasonable deduction rate for a program car.
Used Rental Car Lots
Former rental cars sometimes turn up on used car lots labeled as "program cars." This will be revealed if you run a Carfax report on the vehicle at www.carfax.com. For a modest monthly fee, you can run the VIN numbers of cars you are considering buying. The Carfax report will tell you who the previous owner was, whether the car has a salvage title and if there are any outstanding recalls on the vehicle.
Some rental car companies have their own used car lots where they sell cars they have taken out of their fleets. The cars are reasonably priced and usually offered at no-haggle prices. There are a good variety of cars, too, ranging from sedans to SUVs. In the past, buyers were warned to steer clear of former rental cars because drivers who rent them "beat the heck out of the cars." That might be true in a few cases, experts say. But there are other benefits to offset that argument.
"Rental companies take good care of the cars," one insider said. "And the rental car agencies buy them right to begin with at net, net, net numbers (invoice price minus the holdback, minus the advertising costs and the like). But for peace of mind, you would probably like to have a third-party inspection because not all rental cars are alike; there are some plums and some peaches." Used rental car lots offer benefits for shoppers in search of reliable, reasonably priced transportation. It's worth a look in your quest for a good used car.
Salvage Title Cars
Mention to a prospective buyer that the car has a salvage title, and they run in terror. Still, others have owned these cars and driven them for years. What is a salvage title and can these cars ever be a smart buy?
When a car has been severely damaged (either in an accident, or because of a flood or theft), the insurance company estimates how much it will cost to fix. At some point, the cost of repairs is more than the car is worth. Therefore, the car is often sold to a salvage company and used for parts. To alert future buyers to the car's history, it is given a salvage title.
In some cases, the salvage company, or an enterprising body shop, might fix up the car and try to sell it. Naturally, the price of the car will be below that of similar models because it has a salvage title. The danger is that the car might have been improperly repaired. The biggest problem in these instances is with the alignment of the wheels. If the frame has been bent, it is difficult and expensive to straighten. A bent frame will cause abnormal tire wear and improper handling characteristics.
"Some states require (totaled) vehicles to be branded as salvage cars," an expert told us. "But if it is sold in another state, and retitled, it can be sold to Mrs. Jones as a straight-up used car. She doesn't know it has been cut together from pieces of different cars."
Extreme caution is recommended when considering the purchase of a car with a salvage title. "I know of some cars that have gone through body shops and been made into drivable cars," said another expert. "But keep in mind that if you buy a salvage title car, the chances of selling it to someone else and recouping your money are very slim. If you buy a salvage title car, you might want to count on keeping it until the wheels fall off."
A body shop owner we spoke to also advised buyers to be cautious. However, he added, "Sometimes it works when you're dealing with a theft recovery where there was little damage. You might save $3,000, $4,000, $5,000. But you will lose that right off the top when you go to resell it."
Other Used Car Markets
A sales veteran we know, who is always on the lookout for cars he can "flip" (buy and quickly resell), says that his best used buys have come from spotting cars with "For Sale" signs in the window. "I like cars that people are trying to get out of," he told us. "Like if a kid is going off to college, I might be able to get that car cheap. And chances are, it's a little Toyota Corolla or something. People are always looking for a car in that price range."
When buying an older used car, this salesman always takes the car to a mechanic for an inspection. "I still spend the $50 to take it to a mechanic. Not because this person might be trying to trick me. He might say it's in great shape but he might not know that something's wrong with it."
As a closing note, the experts we spoke to steered us back to the old favorite: buying from a private party. When you buy a very old car, the most important factor is how it has been serviced. Only the previous owner can tell you the car's complete history.
Edmunds.com, Inc. was founded in 1966 for the purpose of publishing new and used automotive pricing guides to assist automobile buyers, and Edmunds.com continues to publish automotive guides today. In early 1995, Edmunds.com launched its Web site, www.edmunds.com, the first automotive information Web site. Today our Web site consists of more than 340,000 pages accessed by over 200,000 people a day.
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