The market for used cars is huge - but how do you play it?
ARE USED CARS GOOD VALUE?
The used-car market is saturated. It’s a great time to buy, because prices are down. Unfortunately, if you already own a car, upgrading also involves entering the market as a seller. Used cars make great actuarial sense … but they don’t come with ‘new car smell’ and can’t be ordered with precisely the trim level you prefer.
WHERE DO I LOOK?
Don’t wear out your shoe leather searching – drive your mouse to your new wheels instead. David Holmes from free used-car classifieds website carbuddy.com.au says the used market eclipses new cars. “Australians buy about 80,000 new vehicles a month,” he says. “I can tell you there are 458,000 used car classifieds listings in Australia today. Anyone who can’t find the used car they want isn’t trying.”
The Internet is where used-car dealers and private sellers collide. Holmes says ‘online’ beats every other buyer resource: “Look at the Trading Post,” he says. “It’s online only – there is no longer even a printed edition available.”
The ‘Goldilocks’ age for a used car is two years. It’s the ideal balance between declining price and service life as a car ages, and remaining reliability and consumer protections. David Holmes says a new car’s depreciation is savage – often costing more than the running costs. That’s a boon for used buyers. “At two years you’re getting something like 40 per cent off, compared with what the first owner paid. These cars generally have only 30,000-50,000km on them, and come with at least one year remaining on the manufacturer’s warranty, or three more under-warranty years if you buy a Kia, a Hyundai or a Mitsubishi [which offer a five-year warranty].”
How much should you pay? Check redbook.com.au’s searchable database for updated private sale price estimates (as well as trade-in price estimates for the car you own now). This is an easy way to identify the likely additional funding you will need to arrange for the upgrade. Be aware that the funds you need must also cover transfer fees, insurance and repairs. It’s also smart to factor in a basic service shortly after buying.
How safe are the used cars on your short list? Australia’s official Used Car Safety Ratings are posted at howsafeisyourcar.com.au.
WHERE SHOULD I BUY?
The good news: More statutory consumer protections (see ‘Debt Discovery’ below) and, in some states, a warranty.
The bad: the price is highest, compared with auctions and private sales.
The good news: Lowest prices.
The bad: The most time-consuming process, with the fewest inbuilt consumer safeguards.
The good news: Low prices and a guarantee of title, and a good access point for fleet vehicles being turned over quickly with low kilometres.
The bad news: It’s easy to get swept up and pay more than you want to. No opportunity to test-drive the car, and little opportunity to inspect it – hardly a lemon-proof process. Beware anything labeled as ‘Sold as Seen’, which is often an auctioneer’s euphemism for ‘defective’. No ‘cooling-off’ period in the deal, and no opportunity to withdraw any bid you place.
Scott Fleming – a.k.a. The Rev Doctor – is an independent mechanic. He says a basic mechanical inspection will cost you less than $100 and take less than an hour. “Let’s say I tell you the car will need two new tyres, new front brake rotors and the timing chain wasn’t replaced at the required service interval 5000km ago,” he says. “That might cost you $2500. Then you go back to the buyer and negotiate the $2500 off the price, which is a pretty cost-effective arrangement.”
Fleming also says a basic inspection can identify key indicators of recent major crash repairs – a ‘red flag’ for many scams (below). “Once the car is up on a hoist it’s easy to see if it’s had major surgery. There are some key indicators we look for – like new parts on one side and old parts on the other, or missing underbody parts. These quickly raise concerns about particular cars.”
The all-important test-drive: make sure the car is insured, and that you are covered while driving it. Don’t drive an uninsured car (if necessary, get a cover note over the phone) because if you crash you may be liable for the damages. Anthony Crawford from CarAdvice.com.au says when you test-drive the car, drive if possible on roads you know. “It’s not all about handling and performance,” he says. “Assess carefully how the vehicle performs, as well as confirming the functionality of all the switches and basic systems like air conditioning, electric mirrors and windows, and the audio system. And don’t forget that test driving doesn’t commit you to buying the car.”
The last thing you want is to buy a vehicle that is encumbered by debt – because it could later be repossessed. Dealers and auction houses are required by law to guarantee title on the cars they sell – so they cannot sell you a stolen car, or one which is the nominated security on a previously established loan (an ‘encumbered’ vehicle). Private sellers are not required to offer any such guarantees – which places that burden right back on you as a buyer.
How do you check up on this? A so-called ‘REVS’ check (Register of Encumbered Vehicles) is cheap insurance. REVS is administered state-by-state and, inconveniently, goes under another name – the Vehicle Securities Register – in SA and Victoria. And yet another name in Tasmania – the DIER Motor Registry. These agencies are all just a click away from Google, however. And they can all tell you quickly if the vehicle can be bought free and clear.
RED FLAGS, FRAUDS & SCAMS
Beware cars from interstate. It’s easy enough for the unwary to buy a repaired write-off – a car that’s had a crash and been written off … and then unscrupulously repaired, re-registered and put back on the road. These repaired write-offs are often unsafe, and are not covered by the manufacturer’s warranty. Most state governments maintain a written-off vehicle register – but the state-by-state nature of the records means the unscrupulous tend to ship such vehicles across borders to sell them.
Re-birthed vehicles – where a stolen vehicle is given a written-off vehicle’s ‘identity’ are less common but still exist in the market. In both cases, a diligent inspection by an expert can usually spot the major repairs intrinsic to the scam.
Organisations like the NRMA and mechanics like Scott Fleming say you should also beware a car that has a hole in its registration history (available from the transport authority in your state) or any reasonably new car lacking the owner’s manual or service books.
These aren’t reasons not to buy – but they do warrant further investigation.
Industry insiders say online fraud is “rampant” in car classifieds. One source told me: “The bottom line is, never commit any funds whatsoever without first seeing the car and establishing its bona fides. Most fraud schemes are centred around getting money out of you up front. That’s simply something you should never do, no matter how sweet the deal seems.”