Don’t Be a Sucker: How to Buy a Used Car and Not Get Screwed

March 4th, 2019 by

Heads up: You’re far more likely to overpay when buying a used car. Here are the tricks some dealers pull, and the steps you can take to beat them.

You might think that you’re saving a bunch of money by buying a used car.

Most people see the sticker prices on new vehicles, or read about the depreciation that takes place when a new car drives off the lot, and think buying used will cost them less.

To the average consumer, that logic is pretty sound.

But it’s also wrong.

In fact, it’s precisely this rationale that can ensnare even the smartest shoppers into making a bad deal on a used car.

The Truth About Buying Used Cars

Consider this: In the first quarter of 2018, people paid an average of $19,657 on a used vehicle, according to Edmunds.

Surprised by the high price tag?

Don’t be. Here’s the truth:

You are more likely to overpay on a used car than on a new one.

Why?

For starters, the markup on pre-owned vehicles is much higher than new cars. As a result the profit margins are bigger too.

Some of that markup is warranted. Dealers may invest hundreds or  thousands of dollars into a used car so that it’s in better shape for it’s next owner.

But some less reputable dealers don’t play by those rules. They use confusion to get people to pay more than they should. Or they make a used vehicle appear to be in better condition than it actually is.

That’s where we come in. In this article, we’ll explain how some salespeople use these techniques to their advantage. We’ll also teach you how to detect—and reject—their tricks.

Why Should You Believe Us?

How do we know these secrets?

Because at Apple Autos, we’ve been analyzing car deals and helping thousands of customers find the right vehicle for more than 25 years.

We’ve heard customers talk about falling victim to shady tactics at rival dealerships. And we think that stinks.

So why should you trust us?

Because we don’t negotiate. In fact, we do everything differently at Apple Autos.

For example:

Our salespeople aren’t on a profit-based commission model. That means they earn the same amount of money no matter what car you buy.

As a result, they have no incentive to steer you toward anything other than the perfect car for you.

(At dealerships where salespeople work on profit-based commission, however, inflated prices mean more take home pay.)

Look, not all used car purchases are bad. Buying a pre-owned vehicle is an effective way to get a quality car while paying less for it. By reading this article, you’ll know exactly how to beat the system and drive away in a vehicle that’s as good as new—at a price that’s even better.

Used Car Dealer Trick #1: They Bank on You Shopping Blind

Salespeople working on a profit-based commission system can get incentives to move less-desirable cars off the lot. Sometimes these cars are called “spiffs.” Salesmen can get cash bonuses by getting you to take a spiff home with you.

More about “spiffs” and other facts about profit-based commission here.

If you show up at a showroom without some idea of the make and model you want, your salesperson could steer you toward a car that meets his needs better than yours.

HOW TO BEAT THE TRICK: Know The Real Numbers

Before you set foot in a dealership, you want to have a clear idea of what types of cars would work best for you — and the price range for those vehicles. There are thousands of third-party used car sites you can use for research. Some solid, reliable starting points are:

Once you find a few models you like, it’s time to get an idea of what you could reasonably expect to pay for those cars.

Unfortunately, when it comes to used cars, that’s easier said than done.

Used cars are a different breed. We like to call them snowflakes, since no two are quite the same.

Where a new vehicle typically “is what it is,” when buying used, a whole bunch of additional factors come into play. For example:

  • accident history
  • total mileage
  • repairs
  • seasonality (For example, where we’re based in Minnesota, a convertible will be worth less in January than in July. Thanks a lot, snow!)

Bottom line: The cost of a specific used car can change frequently. Lots of dealers use volatility to justify higher prices. And it’s hard to push back because there isn’t as much “apples to apples” information on used cars as there is on new cars.

That’s why it’s crucial to arm yourself with as many numbers as possible. We like Edmunds’ True Market Value (TMV) figures, which are based on what other real buyers in your area have paid for that car. We also use Cargurus, which searches over 2 million listings in public databases and sorts used car prices by category, like “great” and “fair.”

When you collect enough prices, do some more grunt work to see if you can explain the disparity between figures. If the vehicle’s Carfax report shows repairs, use Consumer Reports’ Car Repair Estimator to make sure those maintenance costs add up.

You’ll be one step closer to arriving at a more fair and accurate price with this info. And it’s at least one step of prep that dealerships will never expect that you put in. If you do all the research and find a dealer’s quote to be way off the mark, that’s a surefire sign to skip their lot.

Used Car Dealer Trick #2: They sow confusion about certifications

The term “used car” can mean many different things.

A beautifully maintained vehicle that was leased for two years, driven minimally, and doesn’t have a scratch on it? That’s a used car.

A beater that’s been in three fender-benders and pulled out of a flood once? Also a used car.

Manufacturers tried to cut through this noise by creating certified pre-owned (CPO) programs.

In a CPO program, manufacturers take low-mileage vehicles and resell them with updated warranties.

What counts as a CPO vehicle? For a Ford car to earn the manufacturer’s certification, the car must be six model years or newer and have less than 80,000 miles. If the car meets those standards, a Ford mechanic performs a 172-point inspection on it.

Ford will replace or repair any items that don’t pass the inspection to get the vehicle up to snuff. A franchised Ford dealer can then resell the car with a 12-month/12,000-mile comprehensive warranty from the time of sale. It also will include a 7-year/100,000 mile limited powertrain warranty. Ford’s CPO program also offers 24-hour roadside assistance.

Bottom line: With a CPO, you’re buying peace of mind at a discount. Purchasing a 2-year-old CPO car will save you about 25 percent of the cost of a brand-new version, according to Car and Driver.

But not all “certifications” offered by dealers are backed by the manufacturer. Those dealerships can set the rules of their certification however they like. At some dealerships that program could be great, but at others it may be riddled with loopholes.

HOW TO BEAT THE TRICK: Ask These Specific Questions About Certification

If you’re buying a used car that’s marked certified, here’s the point you’ll want to nail down: Is this a manufacturer certification or not?

If so, great. Almost every automaker has its own unique CPO program; you can use Edmunds’ tool to compare all of them.

If not, then the question becomes: What’s included with this certification?

Get the answer in writing.

At Apple Autos, we offer only factory-backed certified pre-owned vehicles. But we also try and take the confusion out of shopping for non-certified vehicles by marking the condition of every used car on our lots. Customers can look right at the windshield and see exactly what sort of shape the car is in, along with an inspection that backs up the label.

Which reminds us: Always ask to see the vehicle inspection report. Dealerships should have one on every used vehicle on their lot. (And if they don’t, that’s not a dealership you want to buy from.)

Used Car Dealer Trick #3: They Sell You Unwarranted Warranties

A big reason why manufacturer-certified CPO cars are so attractive is because they come with warranties. You drive off the lot knowing that you’re covered if you run into trouble.

But dealerships will also offer things that look like warranties, but aren’t. They’re called ”extended service contracts.”And where a manufacturer-certification is the same everywhere, an extended service contract policy will be different at different dealerships. In fact, they’re not even owned by the dealerships — they’re backed by insurers.

So what’s the problem with extended service contracts?

There isn’t one, necessarily.

Some are very comprehensive and can protect you from a big repair bill. But others can be riddled with fine print.

For example: Let’s say you buy an extended service contract on a Ford F-150 you purchase in New York. But then the engine blows up on you while you’re on a road trip to Los Angeles. The service contract you bought might cover the repair — but only at the original dealership, 2,700 miles or away. The contract can’t help you at a dealership in California — or anywhere else.

Basically: You’re stuck.

HOW TO BEAT THE TRICK: Ask These 3 Questions

If you’re considering a extended service contract, you want to know:

  • What doesn’t this cover? If the answer is “basic wear-and-tear,” great. If the finance manager goes on for longer, and lists a bunch of potential exceptions, you have a potential problem on your hands.
  • Where can I use it? Ideally the answer will be “anywhere.”
  • What is the deductible? All policies come with one. And heads up: be sure to nail down whether the deductible is “by repair” or “by visit.” Why? If it’s “by repair” and your car goes to the shop with two or three things wrong, your bill could be $500 or $750 instead of the $250 deductible you thought you had.

Used Car Dealer Trick #4: They Don’t Give You the Facts

A dealership should be willing to show you the vehicle history report on any car you are seriously considering.

For example, at Apple Autos we use Experian’s AutoCheck. It’s a comprehensive car history service that assigns a number (like 89) that shows how a car compares to similar models.

To get this score, AutoCheck pulls data from sources like public auto auctions, insurance companies, accident reports, the Department of Motor Vehicles, and the Federal Emergency Management Agency.

But not all dealerships do this. If you’re shopping somewhere that won’t share the vehicle report with you, that should be a red flag.

HOW TO BEAT THE TRICK: Demand the Facts or Walk

Even if the dealership you’re visiting doesn’t offer AutoCheck, a single Carfax report costs $39.99. You could pay that yourself — but why? They’re trying to get you to pay thousands of dollars for a car. They can spend a few bucks to give you peace of mind.

The salesman should be willing to walk you through the report. The document details the car’s history of ownership, titles, accidents and maintenance. It should also show any structural damage, airbag deployments, odometer checks and manufacturer recalls that may have occurred (see a sample CarFax report here).

Used Car Dealer Trick #5: They don’t let you spend a lot of time with the car

A good car salesperson knows that the test drive is “the moment of truth” in car buying. Often it’s the last step someone takes before buying.

Don’t let them rush you through it.

Some salespeople will ride shotgun and ask you to take short route. That’s not going to give you an accurate picture of what the vehicle is like, or how it performs.

HOW TO BEAT THE TRICK: Treat Your Test Drive Like A Dress Rehearsal

Don’t settle for some wimpy “four right turns” route around the dealership. When you take a test drive, take different types of roads (i.e. highways and side streets) where you can drive different speeds. Cars handle differently at different speeds and on different terrains. You want to know how yours will perform.

Related: In less than 10 minutes, our mechanics can teach you how to test drive a car like a pro. Learn here.

If the car passes your test drive, then here are two more steps to take:

Ask to take the car home for the night. These “extended test drives” are becoming more common within the industry. We like them because they give you a chance to see how the car would work in your life.

Ask to take the car to your mechanic. A good mechanic can detect important issues—frame damage, flood damage, smoke in the upholstery, and any poor repair work. If you don’t have a mechanic, find a repair shop certified by the National Institute for Automotive Service Excellence here.

If your salesperson rebuffs either of these requests, it could be a sign that the car is a clunker.

Used Car Dealer Trick #6: You Feel Like You’re Winning

Let’s say you get back from your extended test drive and are feeling good about the car. The kids love it. It fits in the garage. Your mechanic gave it the thumbs up. Now you’re back at the dealership, and the salesperson starts tossing out discounts, like:

  • Are you a new customer? “Great! Here’s a $400 first-time discount.”
  • Have you bought from the dealership before? “Awesome! Enjoy your $400 repeat customer discount.”

It might seem like the salesman is being generous. But in reality they’re chopping a few hairs off of a price that’s already inflated.

Remember: Dealerships that negotiate set their numbers high so that they can give a little bit of ground but still make out like bandits. And the people who work at them are trained to make customers feel as if they are winning — when almost certainly, you are losing.

In fact, a dirty truth in car circles is that the customers who walk away the happiest typically also scored the crappiest deals. (Don’t believe us? Read the section about “Mr. and Mrs. Happy” in this Car Salesman Confessional.)

HOW TO BEAT THE TRICK: Take the Power Back

As the customer, you’re the one with the power. You can, and should, walk away from a deal at any time if you are insufficiently satisfied that it’s fair.

How can you tell if a deal is fair? That’s the dealerships’ job. Put it on them. A good dealership can back up their used car prices with facts, figures and market data. (We provide all of these materials to used car shoppers at Apple Autos dealerships.)

Ask the salesman: “How did you come up with the price on this car?” If they can’t support the number, then you’ve just discovered a reason to take a stroll.

Used Car Dealer Trick #7: They take the money out of your trade-in

Here’s something shoppers often forget:

Receiving too little for your trade in is just like paying too much for the car you’re buying.

But salespeople know this fact well.

So let’s say you’re trading in a car you bought 10 years ago. The dealership’s used car manager determines that your car is worth $5,000. But the salesman comes out and offers you $3,000 for it.

If you accept that offer, the dealer basically just pocketed an additional $2,000 in profit.

But maybe you don’t accept. Maybe you butt heads with the salesman for the next hour and get them to give you $4,000 for the car. You might feel like you’ve won (see the point above.) But in reality, you still got shorted $1,000.

Which means you paid $1,000 more than you should have for the car you bought.

HOW TO BEAT THE TRICK: Demand to See the ACV

You can avoid all of this back-and-forth nonsense with four simple words:

“Show me the ACV.”

“ACV” is short for “Actual Cash Value.” Every car dealership everywhere uses an ACV sheet to record what a trade-in is truly worth. It’s needed for accounting purposes.

The ACV sheet is the source of truth when it comes to trade-ins. Instead of haggling over a number that the salesman wrote on a piece of paper, just demand to see the ACV. That will give you the real value of your car — and ensure that you’re paid every dollar of what it’s worth.

Related: Follow These Rules to Get the Most Value for Your Trade-In.

 

Posted in Shopping Tips