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HSFPP Weekly Update # 128—Used Car Buying III

Message from Chris Hart: About this time last year, in Update # 90, we covered used car buying and I mentioned that I was looking for a used car, myself. Last summer, with the help of my parents, I bought a ’98 Honda Civic. While it isn’t the most exciting car I could have chosen, it is reliable, it gets good gas mileage, and it has good crash test ratings. Teenagers want a car that looks cool and that has reasonably good performance. These two attributes can be found in a car that is also safe and reliable. The hardest part is getting a good deal on the car. This week’s update shows you how.

Chris is a junior at the University of Kentucky.

Message from Flashman: Vehicles are among the most expensive items most people buy. Many new vehicles cost $20,000 or more, which forces many students and people with low incomes to consider used cars. It also is usually necessary for a person to buy many cars over a lifetime. And, although buying a new car involves a great deal of research, negotiating, and caution, used-car buying has its own risks. The loans are not from the manufacturer and are, therefore, at higher interest rates than new cars. Lemon laws protect you if you buy a new car that is defective, but the same level of consumer protection may not always exist for used cars.

As the FTC Web page listed under our Web Site Picks of the Week shows, the used car buyer must pay attention to a variety of factors in making sure to get a good, working vehicle and retaining all necessary rights and protections in case the vehicle has problems. An independent vehicle inspection is a must. And, of course, there’s the tricky business of negotiating for the best price.

With so many teenagers buying used cars—and finding themselves so often in the adversarial situation of the inexperienced teen against adult salespeople with a whole bag of tricks at their disposal, many of them perfectly legal—it is most important for us as educators to provide teens the information and guidance they need to avoid trouble; because, once they’ve signed the contract, it’s almost always too late to help them.

Related Updates:
Update #95 - Another Danger for Used-Car Buyers - 18 May 2004
Update #94 - Size and Weight in Cars - 10 May 2004
Update #90 - Buying a Used Vehicle - 8 April 2004
Update #34 - Buying a Used Vehicle - 21 October 2002
Update #24 - Car Buying - 28 May 2002

In the last few months, we have added a significant number of new educators to our listserv. On the link page of our Web site, we include links for students and educators for each of the six units of the HSFPP. We also provide a separate link dealing strictly with vehicles. You might want to visit this page and recommend it to your students.

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

 

Web Site Picks of the Week:

http://www.edmunds.com/reviews/list/top10/104930/article.html?tid=edmunds.h..recedmunds.topten.4.*

This page of the Edmunds Web site provides “Top 10 Trouble Signs at a Dealership.” These apply whether you are shopping for a new or used car. If the dealership doesn’t treat you right or applies high-pressure tactics, you should leave. The Edmunds Web site provides helpful information on other car-buying topics such as “Navigating the Trade-In Process.” Spend some time on this helpful site, but remember they also would like to sell you something.

http://www.ftc.gov/bcp/conline/pubs/autos/usedcar.htm

Even better is the Federal Trade Commission’s Web page on “Buying a Used Car.” This authoritative site provides much information on all aspects of the used-car buying process, including your rights and responsibilities as a consumer. Like Edmunds’ Web site, the FTC’s site tells you what you should watch out for, but in much greater detail.

 

Activity for Educators:

Have students read this week’s article In the New$.... As it deals with buying (or selling) a car privately, without a dealer, it opens a whole other can of worms that we haven’t dealt with before in our updates. As students will see, like going to a car dealer, this can be a tricky business. Even though both the buyer and the seller can do better in a personal deal—it can be a win-win situation—it’s no wonder most people go to a car dealer, rather than doing it themselves.

If any of your students have already bought a car, especially a used car, perhaps they could share their experiences with the class. Are they satisfied with their cars? Did they get a good deal? What tricks did they encounter with the salespeople? It is especially easy for teens to relate to the used-car buying experience if they hear about it from peers who have dealt with it themselves. Also, teens should not be ashamed to bring their parents along for support and guidance when buying a car, as they are less likely to be duped that way.

In addition to these resources, you might also want to use Consumer Reports, especially the April car-buying issue.

 

In the New$.... Steer Clear of Car-Sale Scams

“Buyers and sellers need to exercise extra caution with private-party transactions. Here are six tips for avoiding common pitfalls.”

“Buyers and sellers at risk
“Selling—and buying—cars in private-party transactions can save you a lot of cash compared to letting a dealer handle the transaction. But both parties need to be careful to avoid being taken in by criminals.

“Rolled-back odometers and ‘title washes’ are among the more common scams that affect buyers, according to car expert Bob Kurilko of Edmunds.com. (In a title wash, a severely-damaged car is repaired, driven across state lines and issued a new title in an attempt to mask its history.)

“Then there's ‘curbstoning,’ where a dealer tries to dump a lemon by pretending to be a private seller.”

Another concern is paying for the car with a certified check. You, as the buyer, should know whether you are writing a good check or not, but this is a legitimate concern for the seller, as they don’t want to accept a check that will bounce or turn out to be counterfeit.

“Fake escrows don't deliver cars
“Another popular scheme that can dupe both sellers and buyers: fake escrow services.

“Legitimate escrow services act as middlemen, taking payment from buyers and then releasing the money to sellers once the purchased items have been properly transferred. They're common in real estate transactions and, increasingly, in Internet-based sales.

“A fake escrow service can help a criminal steal a car by falsely verifying a payment has been made. More commonly, potential buyers are bilked of substantial sums when they respond to Internet advertisements of ‘great deals’ on luxury cars. The escrow service accepts the cash, but the car is never delivered. (For more details, see MSNBC's coverage of this growing scam.)”

“Risks of relying on strangers
“There's also the remote, but real, chance of being robbed or suffering bodily harm. Private-party sales involve meeting and getting into cars with strangers—always a risky proposition.”

“So why would anyone take the chance of a private-party sale? Because most transactions go though without a hitch, and the savings are substantial.

“‘It's a lot more convenient to use a dealer. The problem is you're going to pay for that convenience,’ said Kurilko, who always uses private-party sales to buy and sell his cars. ‘I can get such a good deal in the private-party market.’”

“6 ways to protect yourself
“If you're tempted to forgo the dealership, here are ways to avoid getting scammed:

“Trust your gut—to a point. Kurilko doesn't believe there's a foolproof way to tell the good guys from the bad guys. Con men are usually good at what they do—the ‘con’ is short for ‘confidence,’ because they're experts at inspiring it in their victims.

“But if your instincts are telling you something's wrong, trust them [your instincts].”

“Don’t go it alone. Both women and men should consider having a burly friend accompany them to a private-party transaction and go with them on any test drives. Some sellers take the added precaution of meeting in a public place, rather than at home.”

“Look for trouble. Getting a mechanic's opinion is a smart move before you buy, but you probably don't want to pay for an inspection of every car you consider. You can check for obvious problems, according to the Edmunds.com book ‘Strategies for Smart Car Buyers,’ by crouching near the front bumper and looking down the sides of the car for bumps or ripples. Uneven gaps in the doors, hood and trunk may also be signs of damage from an accident. Leaking fluids, weird engine noises and soot buildup on the tailpipe are other obvious signs of trouble.”

“Verify, verify, verify. If you're a buyer, a report from CarFax or another tracing service can give you a detailed history of the car and alert you to serious problems, such as rolled-back odometers or a salvage title that indicates the vehicle's been in a serious wreck. You'll need the car's vehicle identification number, or VIN, usually found on the left side of the dash or the driver's side door post.

“If the car was recently owned by a dealership, it could be a sign the vehicle's a lemon that the dealer is trying to dump on the sly.

“CarFax and AutoCheck charge $24.95 for an unlimited number of reports; Consumer Guide charges $23.95.”

“Choose your own escrow service. Using an escrow service is a smart way to handle any large financial transaction over the Internet, but you should avoid doing business with any private party who insists on using a certain escrow firm—particularly if it's not one with which you're familiar.

“Legitimate parties should be willing to pick from a list of legitimate escrow services; you can find the ones eBay endorses.... You also can check out an escrow service with SOS4Auctions.com or escrowfraud.com, which keep lists of legitimate and phony services.”

“Coordinate the transfer. Once a deal has been negotiated and payment confirmed, the car's title should be transferred to the new owner. The title document will have a section that allows the seller to write in the buyer's name and address, plus the car's odometer reading, to transfer ownership.

“Of course, the buyer needs to have physical possession of the title for this transfer to take place. Lost titles can be replaced through the state's Department of Motor Vehicles, but it can take a few weeks. If you're the buyer, you usually need to insist that the seller have this document and be ready to sign it over to you before you hand over your check.

“The process can get complicated if the seller still owes money on the vehicle. In that case, the lender, not the buyer, has the title. If the lender is in town, the buyer and seller can meet there to pay off the debt and transfer title. If the lender is out of the area, the parties can meet at the DMV to get a temporary operating permit based on a bill of sale. The seller can mail the buyer the title once the loan is paid off. (This involves a bit of trust on the buyer's part, but the bill of sale and operating permit help establish a paper trail of the sale.)”

Source: Adapted from “6 ways to steer clear of car-sale scams,” by Liz Pulliam Weston. MSN Money, 4/20/05. http://moneycentral.msn.com/content/Savinganddebt/Saveonacar/P113602.asp

(This article also deals with how to sell a car on your own; so, if you’re interested in that, you might want to go to the original article for more information.)

 

Discussion Questions:

1. What research should you do before going to any car dealerships?
   
   
   
2. Why might it be a good idea to test drive a vehicle and come back another day to haggle over price if you want the car?
   
   
   
3. What should be the most important factors in buying a used car?
   
   
   
4. After reading this week’s article In the New$..., how do you feel about buying a car on your own, without a dealer? Would you do it? And, if so, what would you do differently?
   
   
   
5. How comfortable do you feel with the used-car buying process? What could you do to become more comfortable with it? Is there any way that you think the process could be made easier for the buyer?

 

Kentucky High School Financial Planning Program

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

The purpose of this Web site is to assist county extension agents, credit union educators, and high school teachers in improving the economic well-being of our constituency, beginning with today’s students; and also, to assist teachers in Kentucky in meeting KERA’s goal that all students become technologically literate. Weekly Updates are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators.