Friday, November 9, 2018

Off Lease Only v. Carfax

Should you buy a car that was in an accident?  How can you tell?

A few months ago, a reader asked me what I thought of a car dealer chain called "Off Lease Only" in Florida.  The theory behind the chain seemed sound - you could buy a car that was off-lease and save a lot of money.   However, there were some flaws in the theory, mostly because of the way the car industry works and the way Car Fax and other reporting agencies work.   As with anything else, you have to do your homework.

I looked on their site, as we are thinking of buying a larger truck to tow our new trailer.   As Mark Twain once quipped, "Beware of any venture that requires you buy a new pickup truck" - and I know that quote is real, because I saw it on Facebook, accompanied by a picture of Samuel Clemens. Pickup trucks, as you know, are a hot commodity right now (and will be, until gas hits $6 a gallon next year).  They have been the most popular selling vehicle in the United States for decades.  So finding one on a used car lot is difficult.  CarMax, the used car chain, has complained that they are having a hard time finding popular trucks and SUVs for their inventory.  Customers, it seems, don't want cars anymore - even if they are a better value and better suited to their needs.

But our needs include towing, and sedans have not been suitable for towing for more than a decade.  The last full-size American sedan - the "Crown Victoria" was stripped of its major towing abilities in later years, in favor of gas mileage.  If you want to tow, you have to go with an SUV or pickup truck - the latter being about $10,000 less than the former, similarly equipped.  That third seat is awfully pricey.

Sadly, it seems, most people buy monster SUVs and pickup trucks not because they are hauling anything or towing anything, but to use as daily personal transportation.  Seating for six (or even nine!) and they drive off to work alone, every day.  It is kind of odd.   But the truck makers have responded with pickup trucks that look like the real deal, but have tiny engines and paltry tow ratings (5,000 lbs?  Be real!) because they get good gas mileage and they know that the owners want fancy gadgets and leather interiors, but will likely never put anything in the bed of the truck other than a suitcase.

So finding an F-150, for example, with the 12,000 lb "max tow" package isn't easy.   But I found one at Off Lease Only, with all the bells and whistles, unfortunately in black.   The price was low, but was it a good deal?  (Note that their "fixed price" model now adds on several dealer fees - so be sure to read the fine print before buying!). 

I ran the Carfax on it, and the results were clean but troubling.   It was like the prospective tenants I once screened - their credit report had no bad items, and in fact, no items at all.  As the guy at TransUnion put it, "these folks are ghosts - how do you live 30 years on this planet and have no footprint whatsoever?"  And the answer there was, they were living off-the-grid, in a cash-only world, probably doing something illegal.  Tellingly, they offered to pay me the rent every month in cash.  I declined.

The Carfax showed the truck - a 2017 model - being built in August of 2016 and shipped to the dealer.   It sat there unsold for over two years before being titled, with ten miles on the odometer, in August of 2018.  It was owned only for a month, and then auctioned at wholesale with only 5,000 miles on the odometer.  What the heck is up with that?

In the current SUV/Pickup Truck hysteria sweeping the nation, new F150's don't sit on the lot for a year at a time without a reason.  Typically, they sit for less than 30 days.  Either the dealer was a crappy salesperson, overpriced the vehicle, or just enjoyed paying 24 months' interest on a bank loan, or there is some other explanation.

It could be the dealer drove the vehicle - many modern cars have provisions to "start" the odometer by removing a plastic strip from the instrument panel.  This allows an unscrupulous dealer to drive a car for months and claim it is still "new" with zero miles on it.

Or, the truck could have been damaged in transit, damaged in a test drive, or stolen/recovered from the dealer lot.   If the damage was extensive, it would explain why it sat for so long - being repaired.  Low mileage late-model cars are often suspect this way.  It can take months to do major repairs (including getting approval from the insurance company) and as a result, a car may sit for long periods of time.  When you see a Carfax showing a car not moving for months on end, something isn't right.

Then there is the question as to why it was "sold" and titled in August of 2018 as a "new" vehicle (corporate fleet, no less), only to be auctioned off in October of the same year?   There is a story here.  Repossessed?   The buyer died suddenly?  Didn't like the truck and traded it in?  Lemon-law buy-back?  What?  The Carfax is silent on the issue.   There is a story there and I don't like "stories".

Carfax, of course, isn't always accurate.   And in fact, the Off Lease Only people actually sued Carfax over this.  Carfax history reports can be updated and changed over time, and many times, they are inaccurate.  Off Lease claimed that they bought cars at auto auctions with "clean" Carfax reports, only to get home and find out months later (after they had sold the car to a customer) that Carfax updated the report to show "major structural damage disclosed by seller at auction".  The end customer gets upset and demands a refund from Off-Lease.  If the customer tries to sell (or refinance) the car, the bank balks as the car is deemed to be "wrecked" even if the collision damage was minor.

One can almost feel sorry for a used car dealer.   Almost.

Of course, there are other sides to the story.  I looked up the company on various review sites, including one called "Consumer Reviews" or some such rot, that was all five-star reviews that were glowing.  As one Redditor commented, "I am always suspect of positive reviews that name a salesman by name, are several sentences long and contain no spelling or grammatical errors."

Other review sites were less kind.   One buyer noted that his Carfax report "changed" after he bought the car - no doubt due to the situation noted above.   He tried to "refinance" the car (a sure sign of someone who shouldn't be buying in the first place) and the bank refused due to the negative Carfax report.   As I noted before, these reports can be like the red letter "A" the Puritans put on adulterers (which in a way, was the original Tinder, no?  It pays to advertise!).   The value of the car will plummet by 10-30% with a negative Carfax report.

Glassdoor is an interesting site that rates a company based on what the employees thought of it as a place to work.   Needless to say, their rating isn't five stars there - nor would it be for any car dealer.  Long hours and low pay are cited as big problems, along with insensitive management. From a consumer perspective, I found the company to be bewildering. Just for laughs, I put my contact information on their "contact me" page and I have been inundated with e-mails and phone calls (no texts, as I don't have texting enabled on my phone).  Off Lease was served with a class-action suit in the past for allegedly spamming people with texts - apparently using data from Craigslist used cars sales (allegedly).    But I think they have changed their ways since then.

The e-mails are robos.  Just "do you want to buy yet?" kind of stuff.  I replied to one, asking if they had any other F-150s with the "Max Tow" package, but of course, no one actually wants to reply, they just want the sale.  And (according to some sources) the salesmen are making only a $200 flat fee for every sale, so they have little incentive to do any legwork.

The phone calls are weirder - lots of people with odd-sounding names speaking English as a second language, asking me whether I want to buy this truck, sight unseen, today.  When I tell them no, not today, they hang up.  I guess each salesman hopes they will be the one lucky enough to score that $200 when I decide to buy.  So far, I have been contacted by at least a half-dozen people, none of whom seemed interested in what I wanted to buy, only wanting to close the sale.

Again, this is not to take a dump on this particular company - most car dealers work this way, which is why I say to avoid them all, if you can.   When we bought the Hamster, I wanted a particular car with a particular color and interior (the Nappa leather, which is much nicer than their standard leather).  We drove to Jacksonville to see the car which the salesman said they had in stock.  But instead of a fully-loaded Exclaim model in Fathom Blue with Nappa leather, they had a black car with a black interior.   "Well, it's kind of the same thing, right?   Can I have the keys to your trade?" 

We left quickly.   The name of the game is to sell what is on the lot.   As Lionel Hutz told Marge Simpson, "We sell the right house to the right customer.  The right customer is the one you are talking to, and the right house is the one you are showing them."   You don't make money in the car business by saying you don't have that in stock.  The name of the game is to push iron out the door, particularly iron that the company has already paid for and owes money to the bank on.

And sadly, this seems to be the norm.  You call a salesman at any car dealer - any - and ask them if their F-150 has the Max Tow package.  "Oh sure it does!" they say, and you drive out to see it, only to realize it merely has a trailer hitch, not the 12,000 lb towing package, built-in brake controller, towing assist, hitch assist, anti-trailer sway controller, ten-speed transmission, and so forth.   Salesmen will say anything to get you in the door, and then try to convince you to buy what they have, instead.  That is the definition of sales.   It is incumbent on you the purchaser to resist this.

And yes, we did find the Hamster in the color we wanted and it was worth it - it is a very nice car.  We negotiated the price over the phone, drove to Charleston, and bought it.  The funny thing is, today, you can get all these "high end" options (heated and air conditioned seats and high-end sounds systems and glass moonroofs) in everything from a Mercedes S-class to a Ford Focus and indeed, even in a pickup truck.  In fact, I suspect, these options are often made by the same suppliers, as they tend to look and behave very similarly (which is a good thing).

But getting back to Off Lease Only, I am not sure I am going to buy a car from them anytime soon.  We'll see what else is out there.  Their website - if you bother to read it - does up-front mention that some of their vehicles have accident damage, and if they are aware of it, will disclose it on the sales page.  They also point out that Carfax data is unreliable - it only reports what other people say, so if an accident is not disclosed to them, it does not appear.   And if an accident is disclosed to them after you buy the car, it may "suddenly" appear on the Carfax data.  They correctly recommend that you do your homework and have the vehicle inspected by a trusted mechanic before buying - that can save a lot of problems.

A car can be in a minor accident - or sometimes even in a major one - and still provide years of reliable service, provided it was repaired properly.  But then again, this damage is usually apparent to a skilled mechanic, and if it appears on the Carfax data, it can kill the resale value.  So while a crashed car can be a good deal, it shouldn't be priced the same as a car that wasn't in a crash.  The problems occur when someone sells a crashed car for the price of an un-crashed one.

But what about off-lease cars?  I wrote about this before, and they might or might not be a good deal.  It all depends on the price and condition.  The problem for the consumer is, most off-lease cars are either sold by the dealer who took them in, or are wholesaled at auction and sold by independent dealers. They are never going to be as good a bargain as a vehicle from bought directly from an individual.  But since these cars go to auction or are returned to the dealer, they are rarely for sale by individuals.  Today, with cars costing so much money, it is becoming harder and harder to find "For Sale by Owner" vehicles anymore, (other than basic cars) as many owners are upside-down on their loans, and few buyers are sophisticated enough to arrange financing or pay cash for such a large purchase.

In searching for reviews of the company, I found this fascinating thread on Reddit (which is mostly un-fascinating threads with Memes and crap):

I've seen their buyers at auction.
Take a, say, 2012 MINI Cooper Hardtop with, say, 30K. I buy that car, a nice one, for, say, $13,700 across the block. I get it back to my store, and it owes me $14,100 with auction fees. I spend $400 on average getting the bumper scuff fixed, dings removed, touch up stone chips, fix curb damage on wheels, etc. I then spend an average of $1,000 in the shop including 4 new tires. It costs me $900 to CPO the car. I advertise it for $17,999 and sell it for $17,700. I make $1K-1200 and move it quickly.
OR I watch the same car with a unibody damage announcement and a dirty carfax sell to offleaseonly for $10,200. They own it for $10,500 and sell it for $12,999.
But their price is so much better..............
What is interesting about the comment is it illustrates how car dealers work, and how much headroom they have.   If you can put up with a few scratches and dings (which you no doubt will put on the car in short order anyway) you can save a lot of money.  And whether "CPO" means anything to you or not is your decision.  To me, it is meaningless nonsense - I can buy a set of tires myself, and get good ones, not Chinese-made "Skid-King" brand.

At this stage, I will keep looking.  Before you buy any car, it pays to do the research - understand the options packages and engine choices and what they mean.   An F-150 XL with a 2.7 turbo, 3.15 rear end, two-wheel drive isn't the same as the Lariat diesel 4x4 with every option box checked.  In fact, one will cost twice as much as the other, but each have their different market segments they are aimed at.

The main problem I have with "Off Lease Only" is their name.  It appears that at least some of their cars (including the truck I looked at) are not "Off Lease" but rather merely used cars for sale.  And as I have noted before, when you enter into a business transaction predicated on a lie, no matter how trivial that lie is, it can only go downhill from there.

But we'll see.