Buying a used car is more complex than most people think. Here’s how to sidestep the
lemons, dodge the dogs and otherwise stack the deck in your favour.
I’m John Cadogan from AutoExpert.com.au – the place where Aussie new car buyers save
thousands off their next new cars. Hit me up on the website for that.
More than one in every four used cars sold in Australia hides a potential problem. There
are nearly 4.3 million vehicles listed on the official Personal Property Securities
Register (where the vehicle forms the security over someone’s loan). The average cost of
owning a lemon is up to $2000. Ouch. If you’re in the market for a used car,
here’s how to stack the deck in your favour and avoid an administrative and/or financial
disaster. In the spirit of full disclosure: This report
was sponsored by CarHistory.com.au I’ve been recommending them for years. They’ve
been kind enough to support the production of this used car buyer protection series.
But the words and opinion here are my own – this is not a paid advertisement.
CarHistory offers a simple, online report that takes just a few minutes and it costs
less than $40. That’s basically all it takes to step out of the administrative minefield
and drive off in a high quality used car that you’re certain is not a lemon. The CarHistory
check even comes with a vehicle buyback insurance guarantee that essentially takes risk right
off the table. For more detail on protecting your own best
interests, visit carhistory.com.au/AutoExpert If you visit that dedicated AutoExpert landing
page you’ll save 20% at CarHistory.com.au between now and 31st December 2017. You might
as well tell your friends; they can save too. There are three major administrative speed
humps on the road to avoiding a lemon. The car could be stolen, it could be a repaired
write-off being sold under the radar, or it could be the security on someone’s loan.
Izzy Silva is the General Manager of Consumer and Digital Marketing at CarHistory.
Just to give you some flavour of how Australians research for cars, they spend nearly seven
months researching for a holiday, but they spend 1-2 hours researching for a used car.
A massive difference. A holiday is a week or two, a car is a lifetime investment potentially
handing it down to your kids or family so when you consider those facts, consumers should
spend a bit more time and effort researching a car. And as you mentioned, CarHistory.com.au
is a comprehensive automotive bureau, so we provide the facts behind the vehicle.
Bear in mind that looks can be deceiving – a great-looking car being sold by an apparently
fine, upstanding seller can still be a lemon in one (or all) of these ways. And, if it
is, this will be a disaster for you. The simple message here is: You can choose
the vehicle with your heart, if that’s how you roll, but you have to buy it with your
head. If the car has been stolen, or if the VIN
code (that would be the car’s unique 17-digit alphanumeric serial number) does not match
the engine number, rego number or information on the vehicle’s rego papers, these things
are major red flags. Sometimes there’s a good reason for a mis-match.
A different engine number might mean, for example, that the engine was replaced under
warranty because of a manufacturing defect. However, in any of these cases where a mis-match
is flagged, significant further investigation is required. Do not buy the vehicle until
its status is adequately resolved. The easiest way to validate the VIN code and
rego number, as well as get information on the vehicle’s previous sales history, evidence
of odometer wind-back, rego status, safety rating and emissions, is at carhistory.com.au
Repaired write-offs are a major pitfall. Vehicles in this category are often sold to unwitting
buyers as if they have not previously been written off. And if you purchase such a vehicle
it can be an administrative, as well as financial, nightmare.
The research that we conducted at Carhistory.com.au showed that over 10 per cent of cars that
went through a carhistory report last year in 2016 had a written-off status. Which is
a big number, considering most people don’t even do one of these checks, so … one in
four cars that went through a carhistory report check last year had a problem – encumberance
or money owing being the biggest, closely followed by repairable write-offs.
In some states, like NSW, repaired write-offs cannot be registered. Even if you live somewhere
this is not a problem, a repaired write-off is always worth far less than an equivalent
car that has not previously been written off. In general, factory warranties are cancelled
if the vehicle is written off, and the vehicle’s insurance status changes as well. So in many
ways, a repaired write-off is significantly less car than you may have been expecting.
The CarHistory report neatly avoids the extreme headache of unwittingly buying a repaired
write-off. And if you do buy one of these repaired write-offs, at least you know what
you’re getting, up front. It also details the vehicle’s insurance claims history.
With 4.3 million vehicles listed on the Personal Property Securities Register (the PPSR – formerly
known as ‘REVS’) there’s a significant risk, if buying privately, that you could
end up with a vehicle that forms the security on the previous owner’s loan. (This is known
in the business as an encumbered vehicle.) This is a disaster – for you. If the previous
owner defaults on the loan, the financier will repossess your car, and there’s essentially
very little that you can do about it. CarHistory also tells you if the vehicle is
encumbered, and if it is: get expert advice from your solicitor or accountant about how
to discharge the encumbrance in the course of buying the vehicle.
If the vehicle you’re looking at passes the administrative health checks at CarHistory
it’s time to get your trusted mechanic (or the motorists’ association in your state
– NRMA, RACV, RACQ, etc.) to give that vehicle a thorough physical.
An independent expert can easily assess the vehicle for physical red flags – evidence
of abuse or imminent failure that might cost you thousands of dollars to repair. And they
can also review the vehicle’s service history (and bear in mind that ongoing factory warranty
coverage depends upon the vehicle being properly serviced).
And finally, an independent expert can assess the vehicle for evidence of dodgy crash repair
– perhaps from a repair that did not involve an insurance claim.
If anything is flagged at this point, you might choose to walk away from the vehicle
and buy one in better order instead, or use the defect as a bargaining tool to negotiate
the price down. That often works surprisingly effectively.
Some people know exactly what they want, and most people have some idea. It might be a
sedan, hatchback, SUV, ute, sports car, whatever. However, the market is drowning in choice,
and it is often difficult for a non-car person to get down to a viable short-list, using
rational criteria. In general, you’re looking for the newest
example of the kind of car you want, with the fewest kilometres on the odometer – balanced
up against what you can afford to spend. There are some important considerations to
help you refine your choice. Safety is a tremendously complex issue. You’ve
got so-called ‘active’ safety systems (crash avoidance technology) and also ‘passive’
safety systems (which are designed to protect you during a crash). Active safety includes
things like stability control and ABS, while passive safety includes crumple zones, airbags
and seatbelt pre-tensioners. Things like that. All of these things matter. Thankfully, however,
this complex issue is made digestible thanks to ANCAP, the Australasian New Car Assessment
Programme. The bottom line – aim for a five-star safety rating if you possibly can. Most vehicle
categories have been more than adequately served with a range of five-star vehicles
for more than 10 years now. Choosing a five-star car maximises your chance
of not becoming a grim statistic if you crash. The CarHistory report also includes information
on the vehicle’s safety rating. Cars cost money to own and run – it’s that
simple. It’s easy to assess the likely fuel economy of any car on your short list at the
Federal Government’s GreenVehicleGuide. You’ll get official fuel consumption and
CO2 emission data, as well as estimated annual fuel cost.
(Just bear in mind that these numbers are based on official lab tests, and real world
consumption for most people is typically about 20-25% higher than the lab test numbers suggest.)
Check the service interval, too. Some brands (like Toyota and many Subarus in the used
market) demand servicing every six months or 10,000km while other brands (like Hyundai
and Kia) have moved to 12 months or 15,000km. If you’re a low-mileage driver annually,
it could easily cost you twice as much to service a vehicle with a six-month maximum
service interval. (And bear in mind that servicing is based
on time or distance – whichever occurs first.) CarHistory also includes information on the
vehicle’s fuel economy and emissions. Insurance costs can vary widely between different
vehicles and different drivers. It’s a disaster to buy the ‘car of your dreams’ only to
discover you can’t afford to insure it. Always get quotes before you buy, right, to avoid
this pitfall. Most people use online classifieds to do their
ballpark pricing research. I prefer Red Book – research is free (if you use the ‘research’
tab) and you get both trade-in and private sale price estimates. Just bear in mind that
Red Book’s price estimates are often a little optimistic, and actual transaction prices
are often a little lower than Red Book suggests. Interest rates on car finance vary widely
across the market, and you owe it to yourself to shop around, because considerable savings
are often available, and this can boost your buying power significantly. Do not just blindly
accept the dealer’s first offer, or the bank’s – you’ve got to shop around.
Ultimately the rate you pay depends on the financier’s risk assessment of you. Clients,
generally, with good jobs, strong credit ratings, and asset backing – they tend to enjoy the
lowest rates, and clients with poor references here tend to pay much higher ratest.
Lastly, remember that trade-ins are all about convenience – they’re a quick, easy way to
dispose of your old car. A trade-in will never yield the highest return on you old car. If
you want to maximise the return, sell your old car privately. Just bear in mind that
this can be frustrating and time-consuming as well, and you’ll have to negotiate face-to-face
with the buyer, which many people, frankly, do not enjoy.
I hope this helps you avoid parking a lemon in your driveway – plenty of people get themselves
in that position, but you don’t have to be one of them. I’m John Cadogan. Thanks