Tuesday, June 15, 2010

Used Car Dealers

Would you buy a used car from this man?

Lawyers love Used Car Dealers. Why? Because every time an opinion poll is made about who are the least trustworthy, slimiest, low-lifes on the planet, we Lawyers can always count on Used Car dealers to take the No. 1 slot, which takes a lot of the pressure off of us.

Nobody has a good experience with a used car dealer, unless they are completely oblivious to the fact that they have overpaid for a car. On the other hand, in any legal matter, chances are, while you might be getting screwed by the opponent's lawyer, your lawyer is helping you out - and he might even win. So at least part of the time, lawyers can be heroes. Used car dealers never are.

Why am I so harsh on Used Car Dealers? Well, the reason is multifold. They basically are taking a consumer item that anyone could buy or sell themselves, and marking it up heavily in price. They often disguise the roots of the product, deceiving consumers. They generally have an abusive and harsh opinion of their customers, as well. They are basically people with no perceptible talents in life. And finally, they are taking steps to suppress free enterprise in this country by trying to force consumers to use their services.

Let's look at these factors one at a time:

1. They basically are taking a consumer item that anyone could buy or sell themselves, and marking it up heavily in price. A used car is anything that any person could buy or sell themselves. And in terms of pricing, you are best off buying a used car from an individual, rather than a dealer. The savings, in terms of price, are on the order of 20-30%. Trading-in your car to a dealer is often a false economy, as the "inflated trade" gag inflates the price of your trade-in, so you think you "got a good deal" while padding the price of the new car elsewhere.

So why do people buy cars from used car dealers? Well, why do people patronize rent-to-own furniture stores, payday loans, or pawn shops? For the most part, the more uneducated and the poorer a person is, the more likely they are to patronize a used car dealer. And buying cars at such dealers often perpetuates their poverty.

You don't have to be a rocket scientist to get a loan from your credit union and buy a car from your neighbor. But many people cannot even figure out this simple process - or are convinced that credit is something that will be denied to them. So they go to the place that "finances everyone" and pays top dollar in terms of car cost and financing cost.

The used car dealer is not adding any value to the equation at any time in the process. He is merely milking the consumer for all he can get. Because, let's face it, there is no value added in buying a commodity and re-selling it.

The payday loan people will argue that they run legitimate businesses and that their 300% interest rate loans can be useful for some people. And in a similar manner, used car dealers will try to make the same argument. They could also make the argument that a loud plaid sport coat is attractive. Deep down, they know they are lying to themselves.

2. They often disguise the roots of the product, deceiving consumers. Most used car dealers attend auto auctions, where they buy cars of unknown provenance in bulk and then take them back to their car lots to sell. The best trade-ins (and lease turn-ins) that new car dealers receive are kept on their lot. Problem cars are sent off to wholesale auction houses where they are sold, for cheap, to used car dealers.

Used car dealers buy these, polish them up, and sell them to unaware consumers. Since they offer only 30-day warranties (which are largely worthless, as any car can be kept running for 30 days) consumers often end up with a "fright pig" car down the road, and have to spend thousands in repairs. This is one reason used car dealers have such odious reputations and the complaint rate is fairly high.

When you buy from an original owner, you can talk to the person, often have service records, and make an informed choice as to what you are buying. So why don't more people do this? Well, oddly enough, many folks like the anonymity of buying from a dealer. A used car on the lot has no history, no provenance, but appears to be like a new car - impersonal and generic.

But of course, this is not actually true. Every used car has a story behind it. When you buy from a used car dealer, you just don't get to hear that story. And some people, oddly enough, find that comforting and worth paying 20-30% more for.

People are stupid, of course. Look around you.

3. They generally have an abusive and harsh opinion of their customers, as well. If you become a salesman at a new or used car dealer, you end up having a very harsh view of your customers. You tend to view them as suckers or cattle to be lead to the slaughter. Because that is what the customers, in effect, are.

In Triangle, Virginia, near the Marine base, are a ring of used car dealers. All of them have a line of Mustangs, Camaros, and other cars popular with young military guys, all priced well over market and financed at obscene rates, but with down payments "affordable" to young military men and women. A recent article on NPR discussed how the military is trying to crack down on dealers like this - and educate their soldiers not to buy from such places. Many soldiers end up upside down in debt over a car, which stresses their personal life and makes them less effective as soldiers in the field. The last thing you need to be worrying about, under fire, is making your car payments.

I bought a used travel trailer from one such place, once. They had taken it in trade and wanted to get rid of it, as it was not something they knew how to sell. So I got it for cheap and paid cash. They offered to finance it, and I respectfully declined. I got a phone call from the finance company later on, as the dealer mistakenly put me down as financing the unit. It was a harmless mistake, but talking with the finance person was interesting. She told me they specialized in 20-25% interest rate loans to military personnel. "You never want to borrow from us, trust me" she said.

These are the sort of "deals" used car dealers are offering to our young service personnel. How patriotic. Exactly how low do you have to sink before you start ripping off some young kid with a wife and family, about to be shipped off to Afghanistan? As low as a used car dealer, that's how low.

Anyone buying a car from a dealer is paying too much. So they are not bright people. And the salesman can't have any sympathy for the customer if he is to make sales - particularly the kind of odious deals that make a lot of money for the dealership. So you have to be heartless and cruel, to sell a car to some unsuspecting migrant worker for $1000 over book value, and then finance it at 25% interest, knowing full well the car will not likely outlast the payments. If you had a heart, you'd never make it as a used car dealer.

And as a result of this condition, many used car dealers can be obnoxious people to deal with in their personal lives as well. They tend to view their time as being priceless, and everyone else's time as something they can squander with impunity. The used car dealer is ego-centric and narcissistic, out of necessity.

Why is this? Well it is because....

4. They are basically people with no perceptible talents in life. Most people don't set out in life to become a used car dealer. Young kids don't say "Gee, when I grow up, I want to don the plaid jacket and loud necktie and rip off unsuspecting consumers!" They don't, because it is not a glamorous profession, nor a well-paying one.

And not surprisingly, it is a profession that attracts a lot of odious people - people with no other job skills other than a long line of bullshit. People who have failed in other areas of their life and have no "value adding" skills. They fall into selling used cars as part of a lackluster lifelong career in sales and promotion. They could be selling widgets or computers or waterbeds. It takes no particular talent or skill, really. You buy low, sell high, and hope to eke out a living from the margins. And that is what it really is, living in the margins.

Now, granted, there are a few honest dealers out there (few and far between). But many of those are a dying breed and are vastly outnumbered by the large volume of talentless scumbags out there.

Now, when I say "scumbags", what do I mean? Well the sort of people who might do this...

5. They are taking steps to suppress free enterprise in this country by trying to force consumers to use their services. Used car dealers are actively trying to suppress the independent market for used cars, by making it harder for individuals to buy and sell their own cars.

When I was in Alexandria, Virginia, many people in my neighborhood would park their cars for sale at the local grocery store, with a "for sale" sign on them. The store did not complain, nor did the landlord who owned the strip mall. In fact, they like the fact that it generated traffic for the stores. People would stop to look at a car, and then go into the store to buy products.

But the local used car dealer association did mind. They argued that since there were more than three cars "for sale" in the parking lot, that the grocery store was obligated to obtain a used car dealer's license, under the law. Of course, this is nonsense, as the grocery store was not selling the cars. But to avoid any legal controversy, the landlord put up signs prohibiting people from parking cars for sale on his lot.

You see, the real issue was (and is) competition. The local used car dealers hate it when people dispose of their own consumer goods without paying tribute to a dealer. So they went around to all the local strip malls and had their Lawyer write threatening letters, abusing the law.

Under their legal theory, you could not put a "for sale" sign in the window of your car and drive it around. Because if you did, and you went to the Safeway for a bottle of milk, and two other cars were in the lot with "for sale" signs on them, well, that makes Safeway a used car dealer.

Their argument was that your first amendment rights to advertise your goods, were trumped by their rights to limit competition. It is a frightening scenario, as the right to acquire and dispose of chattel seems to be one of the basic fundamental rights in our society, and any effort to limit the channels of commerce to dealers only seems somewhat chilling to me.

This is stupid, no? Un-American, yes? And guess where many of these used car dealers hail from? Yup, not America. To them, government and laws are something you manipulate and abuse to your own ends. And least in their country.

Well, you say, you could always advertise in the classifieds, right? Well, you could, back in the day, until the dealers started spamming the classifieds with their ads, purchased in bulk. It reached the point where nearly 9 out of 10 classified ads were from dealers. The individual seller's ad drowned in the sea of classifieds. And so individuals stopped using the classifieds, entirely.

eBay, Autotrader, and Craigslist were initially, a relief from this onslaught. And dealers groused about those free-market developments as well, until they realized that they could flood those venues with ads and drown out the individual seller. So far, however, it hasn't worked - and on both Craigslist and Autotrader, you can filter out "for sale by dealer" and peruse ads only listed as "for sale by owner". But I am sure they are trying to put a stop to that as well.

So these are the kinds of people you are dealing with, when you go to a used car dealer. People who don't want free-market competition. People who don't want to compete on the merits. And people who basically have no skill sets in life, so they have to rely on chicanery to try to rig the game in their favor.

These people are not your friends. Their economic interests are entirely contrary to your own.

If you buy from a used car dealer, and it goes horribly wrong, can you really say you didn't see it coming?

There is, of course good news in the used car business. Companies like CarMax have tried to shed the odious reputation of the used car dealer by normalizing the business and making it more legitimate. With the flood of late-model, off-lease cars hitting the market, automakers needed a place where these cars could be sold in a more businesslike and standardized manner.

Fly-by-night roadside stands with office shacks and a dozen cars weren't going to hack it anymore. Of course, such places still exist and thrive - mostly in poorer neighborhoods and regions of the country. "Buy here, pay here" is their mantra.

But if you really want a good deal on a used car, pay cash or line up financing through your own bank or credit union, then seek out a particular make, model, and year of car from an individual owner. You will save 20-30% in the price of the vehicle, know the history of the car (and its owner) better, and also save on financing charges as well.

It is a good deal, so take advantage of it, before the Used Car Dealers of America have it declared illegal.

Because they would if they could!