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 for watching.