 | Essay |
Buying a Car on the Internet
Buying a car with the assistance of or via the internet has become rather common, judging by a few recent conversations:
Several months ago, I overhead a treadmill discussion at the gym between two guys who had both purchased late model bmw's from Florida via e-bay (I live in Wisconsin). This was a foreign concept to me as I had not purchased a car for 8 plus years.
A friend purchased a new Acura recently and comparison shopped dealers within 150 miles of Madison. He ended up purchasing the car locally after successfully negotiating a competitive price.
Most everyone I've spoken with who has purchased a car recently has done so with the assistance of or via the internet. At the very least, the process has made prices more transparent. In some cases, cars were purchased that likely were not possible in the pre internet era.
With this background in mind, I recently jumped in with both feet and purchased a rather old, yet fun 535i 5 speed from a couple in New Hampshire.
The Hunt
Internet Search
I used the following sites during my car search:Newspaper Search
I visited the local newspaper site a few times during my search and was thoroughly underwhelmed at the information depth and utility of the site. Unlike other internet automative sites, the newspaper site features very small text only ads, essentially, straight copies of their traditional print classified ads. Photos are a big part of useful auto ad sites. Interestingly, some internet sellers offer mp3 audio files of the vehicle's engine.
Local Dealer
I visited a local dealer's used car lot during my search process. This firm had one car that I was sort of interested in, but the price was high, relative to other similar cars on the market (Pre internet, it would have been difficult for me to know that the Madison used car offered at a "discount" for $10K could be had in Dallas for $7,500).
While the salesperson was friendly, professional and comfortable with email, it is clear that the dealer process is focused on generating multi-dimensional profits from vehicle transactions. By multi-dimensional, I mean:- The transaction: a margin on vehicle sales
- Financing: lending money to finance the vehicle purchase (and making a margin)
- Insurance: Some dealers offer auto insurance
- Extended vehicle warranty: another way to increase margins - and perhaps protect the buyer (Though you might be better off to simply save the money and plan for maintenance).
- Having said all this, dealers ability to bundle along with their inherent transactional skills can be an asset, as I note below.
The Deal
Purchasing a used car involves a risk assessment and tradeoffs. I knew that any used car would have some maintenance costs over the next few years. For me, a clean maintenance record was critical, along with an obviously well cared for car. I would trade off an older, higher mileage well maintained car for a newer poorly maintained vehicle (this is what I in fact did).
Multiple photos, a seller who was a long term military vet and car aficionado, an emailed detailed maintenance history, a set of new snow tires/rims and a clean vehicle history closed the deal for me on a car in New England. Oh, and synthetic oil....
I paid for the car via two cashier's cheques, one with the verbal purchase agreement and the 2nd when I arrived to pick the car up. I also created a bill of sale that outlined the terms of the deal. We both signed the bill of sale when I picked the car up and presented the 2nd cheque. (note that there are a number of vehicle shipping services. Prices for my deal ranged from $800 to 1200. I decided to drive the car home).
With title in hand, I explored I-90 from Boston to Madison with my new used car (it was a fun drive, other than the very long ordeal around Chicago). Take Lake Express instead.
Results
Thus far, I've been quite happy with my new used car. I took it to Madison's Import Auto Clinic for a once over and oil change. For now, it's been a fun purchase.
Lessons, Risks and Opportunities:
- Buyer Beware:
Your offer price and down payment should reflect your risk assessment of the deal. Some buyers/sellers have evidently run background checks as a means to mitigate risks.
- Dealers:
Buyers and sellers increasingly have more market data at their fingertips. The process seems ripe for an intermediary to mitigate risk - perhaps one already exists? Why not provide a fee based search & transaction/delivery service, or a buyer's agent service? The local dealer relationship potentially gives the buyer comfort. Fired Ford CEO Jacques Nasser tried to implement some of these ideas a few years ago...
- Value:
The NY Times recently ran an article on the 10 least expensive cars for sale in the US. They also correctly pointed out that for $10K, one could purchase a mid 1990's BMW, Acura or Mercedes (varies by model). Given the dramatic quality improvement most vehicles have experienced over the past twenty years, a well maintained car should go a long time. Might as well have a bit of fun, too. The purchase of a used car also minimizes the inevitable depreciation hit that new car buyers face (particularily higher end cars such as a BMW 740 or Audi A8).
- Temporary License Plates:
I discovered that the private purchase of an out of state cars creates sort of a no man's land with respect to vehicle licensing. I stopped at the WI DOT and asked for a temporary plate (I explained that I was purchasing a vehicle out of state). The kind woman explained to me that Wisconsin does not issue temporary plates for out of state purchases. Later, I visited the New Hampshire DOT web site and read their temporary license plate information. New Hampshire requires that all temporary license plate purchases be state residents. Fortunately, the sellers allowed me to keep the plates on until I returned to Madison.
- Insurance:
Make sure you've priced auto insurance prior to buying the car. Purchase the insurance before you begin your journey home. I've shopped GEICO, GMAC and American Express Auto Insurance GMAC and AMEX have very easy to use web insurance application/fulfillment.
Send notes, updates, experiences, links and suggestions to zellmer at mailbag dot com
Published 07/11/2004
