Tuesday, March 9, 2010

Buying a Used Car on the Internet – a New Breed of Shoppers

What about the used car market online? How can consumers quantify the risk they are taking buying a used car sight unseen to make sure it is justified by the savings of such purchase?


Historically, conventional used car buyers have been able to kick its tires, take it for a spin, and haggle over the asking price of the car they like at their local dealer since the invention of the automobile. Because of the internet, a considerable number of these “conventional” used car buyers have found a myriad of ways to harness the power of the ever expanding online automotive resources and tools available at their disposal to make informed buying decisions.

It is from those online savvy buyers that a new breed has emerged - those who buy their used cars online, sight unseen. Although they represent a relatively small portion of the used car buyers, these brave souls see an unmatched advantage and find ways to minimize the risks. But what’s in it for them, one might ask? Simple, actually: selection and price. The internet offers easy access to a vast selection of vehicles worldwide - online car portals, classifieds, conventional dealers with online presence and pure online-only outfits, online used car brokers, to name but a few. Since most of them are looking for a specific vehicle, their chance of finding “the one” is far greater online compared to the confines of their local area.

Needless to say, virtually all of them are looking for a bargain. Our brave souls take risks, but these are justified, at least in their eyes, because of the savings they realize by utilizing the online channel. How do they do it? They, too, are well-armed with the online tools they need to make intelligent buying decisions. Here is how these online tools help them through the decision-making and buying steps of the process.

Fair Market Value

Determining whether a particular car is a bargain is a function of understanding its fair market value given its condition in the context of the current supply and demand. For the non-economists, of course, there are a number of excellent online market valuation sources available. Kelley Blue Book, NADAGuides, Edmunds.com are some of the most widely used car pricing providers. They all base estimates on a large number of recorded transactions and provide appraisal adjustments for the year, make, model, mileage, options, condition and even local market trends. As their appraisal algorithms differ slightly from each other, the estimates may vary, so checking more than one source is recommended. There are three major price levels: trade-in (or wholesale), private party and retail. Trade-in is what one would expect to get from a dealer for one’s used car – it is the lowest of the three averages, but it’s important to know as a baseline. Private party is what one would expect to get if one sells a car to another person, and retail is what one would pay for that car at a used car dealership.

Third Party Vehicle History Reports

In addition to the seller’s honest word and availability of service records our prudent innovators tap into the same third party vehicle history report providers the rest of the used car buyers use. CARFAX and Experian’s AutoCheck, initially serving the automotive professionals only, have been available to the general public for a number of years now. For $24.99 CARFAX offers 30 days and AutoCheck offers 60 days of unlimited vehicle history reports. These provide extensive reporting on the vehicles’ recorded history: date and type of registration and renewal events, as well as checking for recorded incidents, odometer rollbacks, junk, salvage, rebuilt titles, insurance loss, theft, lemon buybacks, etc. Many dealers realize the convincing power of stating the recorded facts and now offer free vehicle history reports for the cars they sell.

Car Inspections

Independent vehicle appraisal/inspection services with online presence have also seen a boost in their business. For $99.95, CARCHEX offers to give any automobile a 155-point pre-purchase auto inspection almost anywhere in the USA. Not too high a price for peace of mind, especially if it can save one from having to deal with surprise repairs. For half of this amount, one can find a mechanic in the local directory who can check out the car and even take it for a test drive on one's behalf and then fax a detailed report. Nevertheless, some of the more thrifty buyers have found ways to save themselves the nominal fees mechanics charge without depriving themselves of the peace of mind of a pre-sale inspection. Say, I live in Boston and happened to find a 1974 BMW 2002tii that I really wanted all the way in San Diego. Now, I would definitely want the car inspected prior to buying it. My thrifty side, however, wants to avoid the $150 fee a local company would charge me to inspect the vehicle. The solution? I would ask a fellow member of the BMW enthusiast community who lives in San Diego to take a look at the car for me. There are plenty of BMW forum members that would be more than happy to offer their time and expertise to a fellow east coast bimmerphile in need.

Shipping

There is a sea of car shipping companies that would gladly bring our pioneers their newly acquired vehicles home at a reasonable price. One example, Dependable Auto Shippers operate a fleet of state-of-the-art, satellite tracked vehicle shipping transporters, which allow one to track one’s car while it's on its way much like one would track a package. Yet, a healthy number of this new breed of used cars buyers opt for driving their new purchase home on their own instead. It’s cheaper, it’s faster, and admittedly, it’s much more exciting. Sellers specializing in online sales of this kind have also adapted to accommodate the demands of this new kind of used car buyer. Airport pickups for our weary yet eager buyers are more or less industry standard, these days. Sellers specializing exclusively in online sales, providing a hot meal for their ‘guests’ at the family table before they depart on their voyage home, is not unheard of.

Although buying a used car online sight unseen is not for the faint of heart, it is a growing phenomenon, which if executed carefully, could be a very rewarding experience for all parties involved.


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Monday, March 8, 2010

Seller or Trader.... Which Are You?

Automobiles are one of the few things in life you can sell yourself or trade in when you decide to upgrade. After all, when was the last time your local appliance store gave you a few bucks for your old washing machine when you bought a new one?

So what's the best way to get rid of your old car? Should you sell it yourself or settle for a dealer trade-in? It depends on what your vehicle has to offer and the payoff you want.


"Trade-in is prepackaged food. It's not as good as homemade, but it is convenient," says Mark Perleberg, lead auto expert with NADAguides.com.

"Selling it yourself is like a home-cooked meal. It takes more effort."

That extra effort, however, can boost your profit.

The case for selling

Selling your old car takes more time and know-how, but you can potentially get more money than when trading it in.

That's because you cut out the middleman, the dealer who must spend money to advertise and spruce up your car before he resells it at a profit. The dealer considers those costs before arriving at the amount he'll give you for your old auto.

A dealer's cut of the profit is what prompts many car owners to opt for self-selling. But remember, you're then going to face many of the same issues that the car dealer would.

If your vehicle is older or in less-than-pristine shape, you'll probably have to get it detailed to make it attractive to buyers. You may even have to spend money on repairs.

You also have to consider your time investment in marketing the vehicle and showing it to prospective buyers, which would most likely be on weekends or evenings.

If you do decide to sell, realistically assess your auto's marketability. Charlie Vogelheim, former executive editor of the automobile price guide Kelley Blue Book, notes that selling a Toyota, a popular brand, is a lot easier than trying to market a Daewoo.

Location also comes into marketing play. A two-wheel drive sport utility vehicle might sell quickly in Florida, but will be shunned in harsher climes where four-wheel drive is a winter-driving necessity. Sales appeal can even extend to color. "White, silver and black are popular colors," Vogelheim says. "Purple is not."

When your car does sell, you'll have to orchestrate payment. No personal checks, please, but what about a cashier's check from the buyer? How about monthly payments?

"You have to decide what type of payment you'll accept, which adds to what some people might call the hassle part (of selling a car)," says Vogelheim.

Another hassle is the paperwork you'll need to complete to ensure that ownership is transferred correctly. Do you have the title? Do you know what your state requires when a car is sold to another consumer?

Benefits of Trading:

Sales Tax savings is one. The allowance you get for the Trade-In will come off of the selling price of the vehicle you are buying, in turn, reducing the Sales Tax amount.  Another is it's hassle-free. No phone calls and rearranging your schedule to meet people that don't show up.

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