Buying a used car can be a minefield for the unwary – but you can tip the odds considerably in your favour by doing your homework and getting a few simple details right
This story assumes you already know the make and model of the used car you want to buy – you’ve done the research on safety ratings, fuel economy, seating capacity, tow capacity, insurance premiums, etc. If you’re in the market now, and you’re face-to-grille with the object of your desire, here are five things you can’t afford not to do – well before you part with any cash. Download the free used car checklist from here for more detailed information.
START WITH THE NUMBERS GAME
Every reasonably modern car, no matter what make or model, in every market on earth, has a unique, 17-digit identifying code called a VIN – or ‘vehicle identification number’. It is located on a plate under the bonnet and also on the registration papers. You need to physically see the number under the bonnet and confirm it matches the number printed on the vehicle’s registration papers.
You should also perform the same basic procedure with the physical engine number (stamped on the engine block) and also the number plates. Make sure the papers and the physical numbers match up. If possible, photograph them using your smart phone, and compare these with the owner’s registration papers. Otherwise, use the hi-tech miracle of the notebook and pen.
A mis-match with any of these critical numbers might have an above-board explanation – but it certainly warrants additional research. It could certainly be a red flag for fraud.
TAKE A HISTORY LESSON
Looking into the past can yield valuable information about a vehicle’s bona-fides, as well as its potential longevity. You need to check three historical details (see carhistory.com.au): the service history, the registration history and the insurance history.
Service history is a significant indicator of likely longevity. Vehicles that are serviced according to the manufacturer’s specifications are likely to last significantly longer. It’s that simple. The log books should bear an appropriate stamp for each of the services, which are due at specified distances or times (whichever come first). You should also enquire about the likely cost of the upcoming few services – because some could require expensive procedures (for example the replacement of an engine timing belt or chain). Gaps in service history could be red flags for early mechanical problems.
Registration history is significant. Long gaps in registration history could indicate substantial periods ‘off the road’ where, for example, the car could have been undergoing major repairs. A hole in the registration history followed by registration in another state might suggest (potentially) that the vehicle was written off in one state, then repaired and re-registered in another state. (Currently it is illegal only in NSW to repair and re-register a written-off vehicle.) Repaired write-offs are likely to be un-insurable, as well as void of the balance of manufacturer’s warranty, if any.
Insurance history is also a valuable indicator of the vehicle’s past. Substantially damaged vehicles that are not written off certainly can be, and are, professionally repaired. However, in a market offering many essentially identical vehicles without such a chequered past, would you really want to purchase one with a significant crash in its past? A detailed look into the vehicle’s claims history will also establish quickly whether the vehicle is a repaired write-off.
Buyers always want to pay less than the advertised price. Sellers – whether private owners or dealers – want top dollar. Fair value is probably somewhere in between. An equitable price is generally more than the buyer wants to pay, and less than the seller would ideally prefer to accept. It’s the nature of any commercial agreement.
Used car prices are merely reflections of marketplace supply and demand. A good barometer of this is updated regularly at redbook.com.au. Both trade-in values and private sale prices are represented in the (free) public research area. Bear in mind that the prices presented are for average vehicles – both in terms of kilometres driven and overall condition. (The average vehicle in Australia drives nearly 15,000km annually.) Vehicles in above-average condition with lower than average kilometres always command higher prices than average vehicles, and vehicles for sale at dealerships command higher prices than those sold privately, mainly because of the increased levels of consumer protection on offer at dealerships.
Many buyers are often rightly concerned with the mechanical health and wellbeing of the vehicle they intend to buy. This is absolutely understandable, and a worthwhile consideration … but a quick road test to establish if the vehicle drives acceptably simply does not go far enough in establishing the vehicle’s suitability for purchase.
A trusted mechanic can (and should) certainly perform a detailed health check on the vehicle’s mechanical condition. It’s good to know if, for example, there’s a significant coolant leak that may require a new radiator, or excessive wear on the brake rotors, or any number of other significant problems in the ‘wear and tear’ domain – before you part with any cash.
A couple of hours of a trusted mechanic’s time could potentially save you thousands. The discovery of problems doesn’t necessarily mean you shouldn’t purchase the vehicle, but it certainly gives you ammunition when it comes to negotiating the ultimate price. You could use the $2000 replacement cost of a set of four brake rotors and new pads (or whatever) to negotiate an additional $2000 discount (or more, for the inconvenience) off the asking price.
But mechanical health and wellbeing alone is not enough. The person performing the inspection should also, at the same time, look for evidence of major crash repairs. This is generally easy enough to spot – with the vehicle up on a hoist and the inspection light out. Overspray from repainting, or missing fasteners, etc., inside the guards or under the body are often clear indicators of major crash repairs in a vehicle’s past. If this is identified, you really should ask yourself if the vehicle is worthy of further consideration. If it is, a discount on fair value is warranted.
Identifying significant problems via expert inspection will cost you $200-$300 at the most, and it could potentially save you thousands. When you look at it in those terms, it’s some of the cheapest automotive insurance you could ever arrange.
Many new vehicles are purchased using finance, as opposed to being bought with the purchaser’s own cash. In these situations the vehicle is often (but not always) used as security over the loan. Hypothetically, this means an unscrupulous seller could sell the vehicle to you, pocket your cash, then default on future loan repayments … and then the finance company will repossess ‘your’ car because it still constitutes the security over the former owner’s loan.
However immoral this arrangement might seem to the new owner, this is the reality of unwittingly purchasing an ‘encumbered’ vehicle.
If you purchase the vehicle from a dealer, the dealer is required to ensure the vehicle is ‘unencumbered’ by any pre-existing finance agreement. However, if you purchase the vehicle privately, the responsibility for protecting yourself from the risk of purchasing an ‘encumbered’ vehicle falls squarely to you.
Thankfully, lenders are required to register all vehicles that secure loan agreements on a central register of ‘encumbered’ vehicles. Protecting yourself from this risk is as simple as a visit to carhistory.com.au (formerly known as a REVS check) – a simple process that can save you thousands.
Essentially, buying a used car is similar to most other commercial transactions. The responsibility for managing the risks you face falls squarely to you. The Latin phrase ‘caveat emptor’ – for ‘buyer beware’ definitely pertains. Thankfully, however, it’s not that hard to weed out the lemons and arrive at a solid used car that will serve you reliably for tens of thousands of future kilometres.