Some questions on purchasing a used car
July 14, 2013 12:11 AM   Subscribe

I am in the new (used) car market for the first time ever. I've found some very helpful advice in past Asks but have some specific questions about the process.

So I know that I will need to bring the car to a mechanic for a check-up before the final negotiations. My understanding is that the process goes (1) test drive car; (2) leave dealership; (3) decide I will buy the car if it is in good shape; (4) have it checked by mechanic; (5) negotiate price based on Blue Book value and mechanic feedback. Does this sound right? My big question here is: should I only bring the car to a mechanic if I could afford to pay the asking price?

My max spending limit is $12,000, including all taxes, fees, registration, etc., making the amount spent on the actual car more like $10-11,000. Yesterday I test drove a car being listed at $14,999 and KBB says the value is $13,000. I really liked it. I would expect to be able to negotiate the price down, but not having done this before I'm not really sure how far down I'm likely to get them. Would it be a waste of my time and money to have this car checked out by a mechanic? How far over my max amount should I be looking? Or should I play it on the safe side and only look at cars that I could purchase for the sticker price, or at least for the KBB value?

Regarding price negotiations -- I know I'm supposed to use KBB values to help me negotiate, but I don't know how much under the KBB value I should start the negotiations. In the example above of a $14,599 sticker price and $13,000 KBB value, what number should I first throw out? My instinct is something like $11,000.

And, what fees do I absolutely need to pay? Obviously I have to pay tax, title and registration, but are there any other fees that are a must? Like, legally required or simply incredibly unlikely to be waived? I hear everything is negotiable, but I just want to confirm that tax, title and registration are really the only fees I *must* pay. I am in California, if that matters.

Lastly, should I steer clear of every car that has an accident reported? I would definitely not buy a car with a salvage title, but should I also avoid cars that have been in fender benders? I'd hate to miss out on a great car that has an accident report and only suffered a minor scratch, especially since there really aren't a ton of my desired cars out there in my price range. The accident reports on Carfax usually do not have much information: would a mechanic definitely be able to tell if the car had serious (or even not so serious) problems from an accident? I am only looking at the 'name brand' dealers, not rinky dink used car dealerships, if that makes any difference.

(Not really relevant, but I am looking at the Honda Fit, Mazda2 and 3, Toyota Corolla and Pontiac Vibe -- greatest concerns are reliability, safety and gas mileage, and wouldn't mind something fun to drive).

I'd really appreciate any advice!
posted by imalaowai to Shopping (10 answers total) 10 users marked this as a favorite
If you're buying a used car from a dealer, and it's offered with an extended warranty covering mechanical faults for a year or two after purchase, they won't make it at all obvious to you that this is (a) optional and (b) run not by them, but by another business that's essentially an insurance company and pays them a commission to sell warranties.

These warranties typically cost at least as much as fairly major mechanical works which, if you've had the car okayed by an independent mechanic, are quite unlikely to be needed within the warranty period. Declining one could easily save you a few thou.
posted by flabdablet at 3:53 AM on July 14, 2013

Best answer: Mechanically speaking, properly fixed fender benders are no big deal. You just want to avoid cars that have suffered severe, engine-shifting, frame-warping damage. Damage from truly minor accidents, and even some moderate ones, can be fixed up good as new. Accidents can affect resale value though, so you should keep that in mind.

For the independent inspection, I'd probably bring that up before price negotiations even got started. I might say something like, "I have a mechanic I really like and have been using for years. If it looks like I might buy this car, could I have him take a look at it?" Assuming the dealer is okay with that, I'd just be careful not to sign any purchase agreements without first penciling in a note that the agreement is contingent on the independent inspection.

what number should I first throw out? ... My instinct is something like $11,000.

I wouldn't think in terms of what number to throw out first, because it's not as if you're going to go back and forth between their sticker price and your initial offer and arrive exactly in the middle. If your limit is $12K out the door then $11K is pretty close to your maximum price and may even be more than you want to pay. It might also be unrealistic.

Some of the best advice I've read on the topic is to ignore the sticker price. On used cars in particular, the big number they write on the windshield with some sort of car crayon is generally a Hail Mary shot that the dealer would be tickled to actually get, often leaving them with thousands of dollars of easy profit. NADA and KBB dealer prices are intentionally high already to give dealers room to negotiate. When the sticker is $1.5k over KBB, they're setting up for a negotiation where they can answer your first sign of resistance with, "Tell ya what. If I can knock a thousand dollars off the top will you buy this car today?" What a deal! You savvy negotiator, you just saved a thousand dollars and still overpaid!

You need to estimate how much the dealer actually has tied up in the car. This is going to be pretty similar to the trade-in values published for the car. If you can pay just a little more than that for it, then the dealer makes a profit much smaller than he'd like (but enough to induce him to sell) and you get a good deal. The best price you can realistically hope for is in the range of hundreds of dollars over trade-in. If the KBB or Edmunds trade-in value for a car is over your budget, you shouldn't even bother test driving the thing because you ain't gettin' that car.

You're wondering what the process might look like. My wife's and my last dealer used car purchase looked like this: (tl;dr at bottom)

*We figured out what we wanted to spend on a car, and pre-arranged financing with our credit union.

*We did the research to figure out what recent models we might like and be able to afford.

*We spent a day in one of those neighborhoods of car dealerships lined up in a row over a couple of miles, test-driving various models over the same roads at the same speeds for a fair comparison.

*After deciding on a model, we found several candidate used cars on the websites of dealers unaffiliated with each other, and I looked up their values on Edmunds, making notes which I took with me when we went test-driving. We started going to those dealerships to see the actual cars we thought we might buy.

*Meanwhile the dealer we eventually bought from put the car we eventually bought out on the lot with a price of almost $17K, which was more than it had cost when brand new (it was pretty new). After some time they knocked the sticker down to about $15,800, which was still way high but at least a bit cheaper than an equivalent new car. That was the asking price when we arrived.

*During the test-drive, with the saleswoman in the car, we commented that we had just test-driven another of the same model, and had an appointment to see a third the next day.

*Immediately after test-driving the car and being transparently enthusiastic about it, we were whisked off to the intimidation negotiation room while they had someone assess our old car for possible trade-in value. We said we really liked the car, but were concerned about the price. We pointed out that their sticker price was virtually the same as a new car, so it really didn't make sense. The saleswoman predictably went to talk to her manager, who came in on cue and offered to knock off $1000 (what a deal!). We asked about the trade-in offer for our old car, and it came in very low compared to the Edmunds numbers I'd looked up. I said that we'd probably just keep it and sell it ourselves. This didn't seem to bother them at all. My wife and I said we needed to talk it over, so we would go to lunch and come back later.

*We went to lunch and talked, and what we arrived at was that based on my research, our budget was really close to the trade-in / wholesale value for the car, and it was fairly unlikely that the dealer would sell it for so little. But, I thought, what the heck; I would make an attempt, for practice if nothing else.

*We went back to the dealership. I went in the front door. My wife stayed in our car because she's mildly disabled and walks slowly, and I wanted to give the impression that we were just briefly stopping by. The sales manager saw me coming, and came out to meet me in the showroom. And I told him straight up that while we really liked the car, we'd decided that we just couldn't afford it. The sales manager didn't want to let me walk away so easily, and prompted me to say more. I said I'd done some research before coming out, and I figured he probably had about $X (I don't remember the exact amount I cited) tied up in it. He shrugged and bobbed his head around affirmatively. I said that at a price we could afford, he'd barely be making any money at all. He furrowed his brow in (probably mock) sympathy, and probed, "So you're thinking, like, $14k?" At which I hunched my shoulders, grimaced and said, "Eh, more like $13K." And he didn't try to negotiate any more after that. He just said, let me talk to the owner and get back to you.

*To our amazement, he called us back around 10 AM the next morning and said we could have it for $13k. This was almost exactly the Edmunds trade-in value, and $4K less than their original sticker price. We drove back to the dealership, looked everything over more carefully than we had the first time, and started signing papers. They slipped in an inflated document processing fee of almost $300, lying to our faces that the state "required" that fee when in fact the amount they were charging was the maximum amount *allowed* by state law. I let that go by for fear of scuttling what I knew to be a very good deal. They prepped the car and we picked it up the next day. It took about a week to sell our old car at the Edmunds suggested private party value. Even our credit union did a double take when they saw the sales contract, because what we'd paid was so far below the published value. Had we given them our trade-in and paid the sticker price, we'd have been about $5000 poorer. Instead, we had a car that we could've still sold at a profit a year later.

We got lucky. It turned out that the Honda Fit we bought had been traded in on a new BMW. The BMW dealer didn't even want it sullying their lot, so they shifted it over to their sister VW dealership, which also didn't want it on the lot. This all happened just before the Fit became a hot and highly desirable car to have; nobody in the area seemed especially interested, especially not VW customers, so they were happy to see it go. Still, the story might give you a sense of what's possible.

tl;dr: Dealer used car sticker prices are often very highly inflated. It's easy to get them down to merely slightly inflated, but the only way you get the price down further is if the dealer thinks you will walk away rather than paying so much, and the easiest way to make it clear that you will walk away is to communicate your awareness that you have many other options.
posted by jon1270 at 6:02 AM on July 14, 2013 [8 favorites]

the easiest way to make it clear that you will walk away is to communicate your awareness that you have many other options

Yes, this. Do you have many other options? Because that can have a big effect on how negotiable the price is. When I bought a Honda Civic it was easy to bring the price down; there are Civics everywhere and obviously I could leave and buy any of the other dozens of comparable Civics for sale in the area. Which I had been looking at, along with all the online what-not for used car pricing, which made me confident that my offer was reasonable.

More recently I bought a car that I waited quite a while to find a just-right used one of. I really could not find any grounds on which to object to the asking price; by every available metric it was a very fair one. And I really had nowhere else to go unless I wanted to wait more months or drive far out of town. There was not an easy discount this time.

Anyway, the popularity of what you're wanting to buy will factor into what is and isn't a reasonable offer. The dealer will be thoroughly aware of how easy/hard it will be for you to leave and buy elsewhere.
posted by kmennie at 6:34 AM on July 14, 2013

The following were very helpful to me in buying my first ever used car: How to Buy a Used Car, and How to Negotiate for a Used Car.

The "silence" trick helped me a lot. I think it's in one of those links. Remember: they are good at letting you talk yourself into a higher price. You can respond with silence to something that they say.

When I was buying my car, the dealer came to within about $500 of my walking price, but refused to come down any more. So I walked out, and as I was opening the door they called me back in. They brought me in to the sales manager, who showed me some stuff on his computer, talked about local prices for that kind of car, etc, and basically told me that they couldn't lower the price any more. I just waited without saying anything for about twenty seconds, or maybe I said "hmmmm" with a bit of a frown on my face, and they knocked $500 off the price!
posted by number9dream at 6:37 AM on July 14, 2013

Some dealers will charge a "Doc Fee" or "Documentation Fee", supposedly to cover the cost of paperwork. This can be anywhere from under $100.00 to several hundred dollars, and they may only spring it on you after you've agreed on a price and are signing a contract. It's entirely money that goes to the dealership, but they may tell you that they're legally required to charge all customers the same fee. Whether this is actually true or not varies by state.

When negotiating price, you may want to focus on the "out the door" price with tax, license, and all fees included to avoid surprises like this.
posted by zombiedance at 9:15 AM on July 14, 2013

Response by poster: Thanks for the answers, everyone.

jon1270, it sounds like you didn't bring the car for a mechanic's inspection? If you had, where in your process would you have brought it to a mechanic?

(And yes, it seems like Honda Fits are now very popular used cars: that is my first choice and they're aren't many of them out there and they go very quickly. I have widened my options so I have the hope of actually getting a car someday!)
posted by imalaowai at 11:21 AM on July 14, 2013

The last two cars I bought, I had an "out the door" price (I think $5000 the first time and $6000 the second time) and that's exactly what I told the salesman. I was with my dad both times but the one doing the talking, and 23 the first time and 26 the second time, and the second time the salesman definitely looked at me oddly cuz I knew the ~~secret car salesman lingo~~. Anyway if they're asking $15k and you're not paying above $12k total, tell them you want the car for $12k out the door and if they accept it, they'll make all the numbers work somehow. Also FWIW, I've never taken a car to get an inspection after test-driving it, but my dad knows a decent amount about cars and I felt comfortable with him looking it over with me before I made an offer.
posted by jabes at 12:54 PM on July 14, 2013

You're right, I didn't have a professional pre-purchase inspection done. I do most of my own car repairs, so I crawled all over the thing in the parking lot myself until I was satisfied. Might not have been the smartest move, but it has worked out anyhow. But had I wanted one, I would've had it done after agreeing on a (explicitly contingent) price. I don't see any advantage to having the inspection done first, as it would only weaken your negotiating position.
posted by jon1270 at 1:54 PM on July 14, 2013

Best answer: I'd do the mechanic's inspection last. Negotiate the deal, be clear that you want to have your mechanic look at it but, "Assuming that everything checks out, I'll buy this car for $X." If the mechanic finds anything major (and I'd bet good money that he won't), you come back and re-negotiate or just walk away. Otherwise, you can come back and sign the papers.

As far as negotiating goes, just figure out what you think the car is worth. Use that number as your first counter offer and just stick to it.

My favorite car deal ever (when I sold cars for a living) was a guy who had seen our car on the internet, came in the day after a huge snow storm (which got me out of brooming snow off the cars and moving them so they could plow), test drove the car, told me straight out that he loved it and wanted to buy it when I asked. He had a car he was trading in so we drove and then showed him opening offer. It was a token discount on the car he was buying a low-ball offer for his trade (this is pretty standard).

He said, "Well, I know your invoice price on that car is $X but you have to make some money so I'd like to pay this much." He wrote down a number that was $x+$300. Then, "Kelly Blue Book says my car is worth $Y on trade but I know you have inspections, advertising, and a few other things to pay for so I'd like you to give me this much." And he wrote down a number that was $Y-$300.

I asked, "And if we can do that you'll buy the car?"


I was stunned. Customers are never that reasonable. I went to my manager to get him to see if he'd sign off on the deal and told him what the guy said. My manager asked, "Do you think we can get any more money out of him?"

I said, "I kind of get the feeling that he'll stick to his guns but, more than that, I don't think we should. He's being so reasonable that I think we should do what he wants."

So my manager signed off on the deal and a little while later, the guy drove off in his new car. To this day I think that man was some kind of car salesman's angle.

Point is, you can absolutely just pick a number and stick to it. Either they can make that number work or they can't and you'll find a different car.
posted by VTX at 3:57 PM on July 14, 2013 [7 favorites]

The OP may or may not know that there is economic theory surrounding the question of used car prices (and those of certain other products). Even if the math is of no interest, I thought the reference would help to show that the very nature of the market creates price expectations that are often unrealistic (in both directions), at least if I understand the theory myself. That should give the OP additional confidence in sticking to their budget and comfort zone.
posted by forthright at 4:29 PM on July 14, 2013

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