Sunday, December 7, 2008

Buying a Car, a Classic Example of "How NOT to!"

My previous post illustrated how you can purchase an automobile as a rational decision and end up with a decent looking car that provides you with reliable service at a minimal cost.

At the other end of the spectrum, well, you can throw thousands of dollars down the hole with cars. Consider this (bad) example:

Frank saw a Jaguar parked on the side of the road on his way to work every day. It was a green sedan, and Frank remembered how when he grew up, that Jaguars were considered "cool" cars. He idly thought about how nice it would be to have one, and fantasized about owning that Jag. Every day he drove by it, he'd think about that car.

He didn't need a new car, or another used one. Frankly, he need a Jaguar like he needed a hole in his head. Cash was tight and he was barely making his monthly bills. But he had just got a tax refund check, so he had a few grand in the bank this month.

So one day, after work, Frank stops to look at the Jaguar. It had been sitting for a month, and the lawn had grown up around it. Grass clippings were stuck to the tires and wheels. The owner came out and showed him the car. The driver's door opened with a creak and they tried to start it. No luck. The battery was dead.

The owner got out a battery charger and an extension cord, and while it charged up, the owner showed him the rest of the car. The once proud Jag had fallen on hard times. One panel had a dent in it ("you can take that out, easy" the owner said) and small amounts of rust were creeping around the wheel wells. The driver's seat was slashed to ribbons - so much for Connolly leather. Some of the electrical "toys" like the power windows and locks no longer worked. The A/C was busted, too, but Frank figured that in rural New Hampshire, where he lived, it was not all that necessary.

They finally got the car started and it roared to life as the owner held down the throttle. Wow! What a motor! Only later would Frank discover that the loudness of the engine was due in part to the rusted exhaust. They got in the car and drove it around. It seemed to handle a but quirky, but wow! Driving a Jaguar! This was what he had dreamed of since he was a kid.

Frank had no idea what he was buying. He never researched the car or figured out what a good "book" value for the car would be. Since he lived out in the country, there were not a lot of places where you could get a Jaguar fixed - and not a lot were for sale locally.

The owner said he wanted $5600 for it, which seemed like a steal for this "luxury" car. Frank tried to talk him down a bit, but the owner held firm. Frank easily paid $2000 too much for this nightmare.

Frank brought the car home, thinking his wife would be pleased by this luxury car. She wasn't, and a fight ensued. "What the heck do we need with a hoary old Jaguar?" she said. And she had a point.

Frank put tags on the car and drove it to work the next day. Of course, the battery was dead by the end of the day, and he had to jump-start the car. "Oh well, a new battery isn't too bad".

But when Frank went to the local gas station to get the car inspected, he discovered, to his horror, that he had bought what is known in the used car world as a "fright pig". Nearly everything on this car was broken, rusted, or just plain worn out. What little was left working was well on its way to breaking soon.

The car needed a total brake overhaul, including pads, discs, parking brake cable, new hoses and lines, and even a master cylinder, which was leaking. The total bill would be easily over $2500, and it would take a week to get the parts.

What's more, the tires were nearly shot, having little tread left and being dry-rotted. The suspension was also shot. In addition to new shocks, the front end was worn out, needing new ball joints and tie rods. This would run an additional $1500, if he skimped and used cheap tires.

The car needed a new muffler - and resonator for another $800. And it was burning oil, which could not be fixed unless he had the engine rebuilt.

The worst news was the rust. The rule of thumb with rust is this: If you see a "little" rust as Frank did, multiply it by 10 or even 100 to get an idea of the total rust involved. The rear shock towers were rusted out and the shocks were ready to poke through into the trunk. The mechanic didn't even want to touch this last part, as welding so near the gas tank was suicidal. Removing and re-installing the gas tank would add $500 to the repairs.

The mechanic "knew a guy" who could weld the shock towers for cheap. Hank had that done and had the brakes overhauled and new tires put on, and charged it all to his credit card. On the way home, he stopped at Wal Mart and bought a seat cover for the torn front seat. It had a picture of "tweety bird" on it.

Frank didn't mention the cost of repairs to his wife. When he got the car home, he put it in the garage and started looking at the rust on the wheel wells and the dent in the rear quarter. Poking with a screwdriver, he knocked off some of the rust. He kept poking and poking and pretty soon, he had gouged out nearly the entire wheel arch. It turns out the paint was barely hanging onto all that rust. Ouch.

On the way home from work the next day, he stopped at the NAPA store and bought a gallon of BONDO and some sand paper. That night, after supper, he gouged out more rust and sanded it back almost to bare metal and applied layer upon layer of bondo into the holes. He found an old door screen in the garage and cut that to wedge in the holes, so the bondo would have something to stick to. Even with that technique, one wheel well swallowed up a whole gallon can of the stuff.

The car looked pretty sickly now, with the garish red bondo, grey primer, and faded "British Racing Green" paint, along with the ill-fitting "tweety bird" seat cover. But Frank was not about to give up! Every evening, he'd bondo and sand and bondo and sand. His wife was glad to have him out of the house, but worried about how much money he was spending on the car.

Eventually, the rear fenders started to fill in and look sort of Jaguar-ish, or more like a Jaguar that someone made of plasticine clay. The bondo lumped and bumped and no matter how much he sanded, never went flat and smooth. Grey primer started to cover larger and larger sections of the car, and overspray dotted the windows and tires.

Frank stopped by a body shop one day on the way home from work to get a quote on repainting the car, now that the body work was "done". The body shop owner shook his head, but politely wrote up a price quote for $3000, knowing full well that Frank would never have the money to pay for such a job (and the body shop owner didn't want Frank's rusty hulk dirtying up his bays anyway). Frank thought about the local "speedy paint king" place, that offered to paint "any car for $299!" but even that seemed excessive. The cars in the lot there all had paint on the trim, windows, and masking marks around the door handles and side moldings. On the way home, Frank bought several "foo-foo" cans of "matching" Jaguar green paint.

Frank had, by this point, over $10,000 invested in this car, and it was still a fright pig. A fright pig with a new battery and some very cheap tires, but nevertheless a fright pig. It would never be a collectible with all the rust on it (the floor pans were ready to poke through at any minute) and the engine was burning a quart with nearly every tankful. Frankly, even pristine examples of old Jag sedans like this were never likely to become very collectable. The car looked funny with its bondo'ed panels and orange peel paint job. Within a month, Frank noticed that his bondo job was starting to bubble up again.

On the way to work a month later, the car died in the middle of the road and refused to budge. Towed to the garage, Frank got the bad news. The broken kitty needed a new transmission. His mechanic could find a rebuilt one for $3500, but it would cost another $1500 to install it.

By this time, Frank's wife saw the credit card bills and caught wind of what Frank was up to, and put her foot down. Frank argued that they had $10,000 "invested" in the car already, so putting $5000 into a "new" transmission made sense. His wife argued that the car was a bottomless pit of money and that they should cut their losses now and get rid of the car.

Frank sighed and agreed and put the car out at the end of their driveway with a sign saying "For Sale, $5000". Needless to say, the car still sits there today. An old, broken-down rusted-out Jaguar that won't even run under its own power is worth about what the scrap man will give you for it.

So what did Frank do Wrong? About everything. Here's a list of what I can spot:

1. NEVER buy a car because you drive by it every day. If you decide you need a car, research the makes and models and make a rational buying decision. Deciding you want to buy a car, boat, or RV merely because it is a familiar sight almost always ends up being a bad decision.

2. RESEARCH a car before buying. What is a reasonable asking price? What defects or wear points should you be looking for? Never close a deal without knowing what the book value of the car is. If Frank did even modest research (checked the Kelly Blue Book at his local credit union) he would have realized that the car was radically overpriced.

3. WALK AWAY from UNREASONABLE SELLERS: Frank got taken by a seller who was "firm" on his price, even though it was far above market value. Such dreamers are plentiful and they do waste your time. You cannot "negotiate" with such folks, as they believe they have a rare collectible and not a junk heap. Just walk away and don't waste your time.

4. Buy the BEST EXAMPLE you can find: Repairs are expensive, so there is no point in buying a "junker" and trying to "fix it up". Even if you can do the labor yourself, as I can, you'll end up spending thousands and thousands of dollars on parts and hours of your time. You can buy a better car with all that work done already for less time, money, and hassle.

5. INSPECT before you BUY: Most mechanics, for a small fee, will put your prospective purchase up on the rack and give you a list of what needs to be fixed and an estimate of repairs. If Frank had done that, his mechanic would have given him the bad news ahead of time - and told him to walk away from the deal.

6. WALK AWAY from even a LITTLE RUST: Rust is nearly always impossible to repair. It creeps like a cancer and is nearly impossible to remove. The only proper repair for rust is to cut away ALL of the affected areas, back to solid metal in every direction, and WELD IN new factory panels. It is an expensive and time-consuming process. Again, you can find a rust-free car for less money, even if it means driving or flying to Arizona or California.

7. Know When to Quit: Throwing good money after bad is never a good idea. When Frank discovered that he paid more than book value for the car and it still needed thousands of dollars in repairs, he should have sold the car or donated it to a charity and cut his losses right then. As it was, he spent nearly ten grand for only a few months worth of transportation. For that much money, he could have bought a rust-free Jaguar in fairly decent shape.

Cars like Frank's Jaguar are everywhere, it seems. And people buy them, too. I see them all the time and wonder what possesses people to even bother to refuel such heaps. With the price of scrap metal being what it is, the economic model for driving a "junker" makes little or no sense anymore. Once a car is worth less than a grand or two, it is no longer worth repairing, unless repairs can be done for free or at low cost.

And yes, over the years, I've talked myself into buying a "fright pig" or two, only to later regret such a decision (and later on dumping the car for pennies on the dollar). I've learned the hard way that it pays for "fish a little further upstream" and find newer examples of a vehicle, or one in much better shape.

Fishing that far down the food chain makes little or no sense. And yet folks do it every day, just as they run up credit card debt and buy lottery tickets. Just because folks do it, doesn't mean it makes sense.

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