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HSFPP Weekly Update # 156—Need to Do Homework When Buying a Used Car

Message from Bob: One of our goals in developing these weekly financial lessons is to expose teens to print and Internet resources that will help them make wiser choices. As we all know, most teenagers want to buy a vehicle and they need the information to make the best deal they can. This week’s take-home assignment provides them just the information they need. It requires them to use the annual April auto issue of Consumer Reports, just out this month, as well as the Web sites available from our link page for teenagers. These are great resources to help teens check used cars for a history of reliability and cost.

4-H agents who receive these updates should also note the new section at the end, a 4-H Club Lesson. Please let me know what information and resources you need so I can continue to adapt these updates to meet your needs. Teachers, credit union personnel, and home schooling parents, please also let me know what you need from us. Financial illiteracy is a tremendous problem in Kentucky and nationwide, so we want to meet the needs of the widest audience possible.

Message from Chris: Cars damaged in last year’s hurricanes and floods are now appearing on dealers’ lots, as well as in private sales on the Internet. Since a used car is the largest consumer purchase most teenagers make, they should be wary of fraud and know how to protect themselves. I recommend, if at all possible, that teens play it safe and buy a vehicle from a relative who has their best interests at heart; but they still need to know how well the vehicle is likely to stand up to the usual wear and tear. The April issue of Consumer Reports is a good place to start. I used it when I bought my first used vehicle, a 1998 Honda Civic. This car may be unexciting, but it is fairly safe and reliable and meets my transportation needs without breaking my budget.

Car-buying, which we cover often in the weekly updates, is an important issue not only to teenagers, but also to you, the educator and adult car buyer. Could you get a better deal on your next vehicle? Do you know what scams and safety problems to watch out for? Most of us can stand to learn a little more, and these updates could be relevant for you, as well.

 

Web Site Pick of the Week:

http://ag.ky.gov/families.htm

The Kentucky Attorney General’s Web site provides the means for you to file a consumer complaint, sign up for the telemarketing No Call List, and get information about consumer issues such as scams and charitable giving.

http://ag.ky.gov/cp/lifesmrt/default.htm

The LifeSmarts Program, which starts again in October, is a fun way to reinforce the HSFPP and other areas of Family and Consumer Science, using a game show format. Students will enjoy it because they get to work with friends while learning concepts that will help them financially throughout their lives.

http://ag.ky.gov/cp/quiza01.htm

This is a great quiz to test your knowledge of consumer issues.

In the New$... Teens Need to Do Homework When Buying a Used Car

By Chris Hart, Senior in Telecommunications, University of Kentucky

Many teens, as soon as they have their driver’s license, want to buy a car. Often they know what kind they want and are in a hurry to buy. But, because a vehicle is the largest consumer purchase teens are likely to make and it is so easy to get taken when buying a used vehicle, I would recommend if at all possible that you play it safe and buy a vehicle from a relative who has your best interests at heart. If you aren’t able to make such a deal, I would then look at the April issue of Consumer Reports, which tells you which brands and models have been reliable and which have not. I did this before buying my 1998 Honda Civic two years ago and have been happy with my decision. This does not guarantee you will not get a lemon, but it does reduce the likelihood of that happening.

Even so, scam artists can take advantage of you in various ways, such as by rolling back the odometer and getting a fraudulent title in another state. And, if you buy from a legitimate dealer, you will find the seller more experienced than you, with a bag of legal tricks to make the deal more profitable for them, at your expense. Either way, you need to do your homework before you buy and not afterwards.

According to Kentucky Attorney General Greg Stumbo, consumers should be wary when buying a used vehicle because many of those currently for sale were damaged in last summer’s hurricanes and floods. Stumbo says, “Experience from other hurricanes tells us to be on the lookout for flood-damaged vehicles ... Kentucky requires [vehicle] titles to be branded as ‘water-damaged’ or ‘salvaged’; however, an unscrupulous dealer may obtain fresh documentation that hides the vehicle’s history before it enters Kentucky.”

The first place to check for vehicles damaged in last summer’s hurricanes is the National Insurance Crime Bureau (NICB); their database of damaged vehicles is available to the public free of charge at www.nicb.org. Enter the vehicle identification number (VIN) to see if the vehicle you’re thinking of buying is on their list.

According to Robert Flashman, Extension Specialist in Family Resource Management with the University of Kentucky College of Agriculture, used car buyers should also check with Carfax or another vehicle tracing service that provides a detailed history of the car and alerts you to serious problems other than water damage and salvage titles. In addition to water damage, Carfax and other tracking services can alert the consumer if the vehicle has been in a serious wreck or has a rolled-back odometer and ‘washed title’ (transfer of vehicle title from state to state by unscrupulous sellers until they have a clean title). In order to obtain a report, you will need the car's VIN, usually found on the left side of the dash or next to the driver's side door post.

No system is foolproof, however, and the NICB and Carfax databases are incomplete. In addition to obtaining these reports, Dr. Flashman recommends getting the opinion of a reliable (and neutral) mechanic before you buy. But, because the mechanic, like the Carfax report, will cost you money, you might want to do a basic check yourself, rather than having the mechanic look at each vehicle you consider. Examine the sides of the car from the front bumper to the back; if it is uneven down the sides or has strange gaps at the doors, trunk, and hood, it might have been in an accident. Look also for rust, which is a sign of water damage; as well as leaking fluids, unusual engine noises, and soot on the tailpipe. Then have your mechanic inspect the vehicles that seem okay to you.

Prevention is your best protection to avoid problems with the purchase of a used vehicle.  Consumers who have questions or who need to file a complaint may contact the Kentucky Attorney General’s Consumer Hotline at (888) 432-9257.

Sources: (1) “Be Wary of Buying a Used Vehicle,” by Robert H. Flashman, State Extension Specialist in Family Resource Management, University of Kentucky College of Agriculture; (2) “Attorney General Greg Stumbo Warns Consumers of Flood Damaged Vehicles” [News release], 3/27/06; (3) “6 ways to steer clear of car-sale scams,” by Liz Pulliam Weston. MSN Money. http://moneycentral.msn.com/content/Savinganddebt/Saveonacar/P113602.asp

 

Discussion Questions:

Discuss your vehicle buying experiences.

1.) For those who have bought a vehicle, what did you learn from the experience?

 

2.) What tips and pitfalls to avoid would you give to anyone who is going to buy a vehicle?

 

3.) What would you do differently the next time you buy a vehicle?

 

 

Follow-Up Activity:

Business class: Complete the activity on page 79 of the HSFPP Student Workbook, also available at the HSFPP Web Portal: http://www.nefe.org/hsfppportal/includes/main/home.asp?portal=1
Click on Unit 6, then click on 6.1, “How Well Are You Covered,” to compare your current car insurance with two other car insurance companies.

Compare three vehicles you like and can afford (no Porsches!), using resources such as the April 2006 issue of Consumer Reports, http://www.kbb.com, and http://www.edmunds.com. Use at least four sources. You already have three. Get insurance quotes from three insurers for each car.

Then answer the following questions:

1.) Based on price and quality comparisons and insurance costs of the three cars, which car do you think is best? Why?

 

2.) Considering the ratings and insurance costs of the three cars you chose, would you still want to buy any of them? Why or why not?

 

3.) What are your most important criteria in selecting a vehicle to buy?

 

 

4-H Club Lesson:

Three Parts: Used Car Buying, Financing, Insurance

(You might also want to do the Follow-Up Activity above.)

Complete the activity on page 31 of the Consumer Roadmap book (Consumer Savvy series). Then answer the following questions:

1.) What is the difference between the base cost of your car and the cost with all the extra features? Do you need all those extra features? Are they worth the extra money?

 

2.) Why is buying a car a decision that you should consider carefully?

 

3.) Why is owning a car a large financial responsibility?

 

Using the retail values of the vehicles you chose, do the activity comparing lenders at http://www.nefe.org/hsfppportal/files/10%20Portfolio_12.pdf. Credit Unions will often have their car loan rates posted.

 

Kentucky High School Financial Planning Program

http://www.ca.uky.edu/fcs/hsfp

The purpose of the HSFPP weekly financial updates and Web site is to assist county Extension agents, credit union educators, high school teachers, and parents who home school their teenagers so that they may improve the economic well-being of our teenagers; and also to show educators how the HSFPP and the weekly updates meet Kentucky core concepts. The Web site and weekly updates are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators. The list of core concepts and order form for free program materials including the student guide and instructors manual can be found on the Kentucky HSFPP home page.