As consumers, we are always looking for the best deal. But when it comes to buying things, certain economic principles almost always prevail. People generally don't give things away, and when they do – watch out!
This is especially true when it comes to buying a used car. When a car is priced very low, you can expect it's very old, needs some repairs, has a lot of wear and tear and might not be that fun to drive.
But what if you find a car that isn't all that old, appears to be in good repair and and has an unbelievably low price? Chances are there are problems that aren't obvious and if the seller doesn't point them out to you, you could become the victim of a scam.
To find out which used cars may be too good to be true, iSeeCars.com, an automotive website, looked at 50 million used cars for sale by dealers over the last two and a half years. Its study focused on used cars that were priced well below the average market value.
It found that the lowest-priced vehicles had the best chance of being too good to be true. It also found that $12,000 seemed to be the cut-off point.
If a used car were priced at $12,000 or above the chances of it being a potential fraud were only 0.3%.
Cars priced under $5,000 were more than 7 times as likely to be a scam. Cars under $3,000 had the greatest chance of being a lemon.
Even the small difference between $12,000 and $10,000 appears to be a factor. The study concludes that cars priced below $10,000 are 3.6 times more likely to be a scam than those over $12,000.
Not as advertised
How is the car a scam? Only if it is not as advertised. Defects should be disclosed.
In some cases an abnormally-priced car might have been in a flood. It might have serious mechanical issues not readily apparent to the casual car buyer. It might have been totaled in an accident and, while repaired and drivable, has a “salvage” title that greatly reduces its value.
In some cases the odometer has been tampered with – a crime. The car you are told has 74,000 miles in fact may have closer to 150,000.
The iSeeCars.com study found these problems are much more likely to be found on the low end than the high end.
“It may be that dealers think they are more likely to get away with cheating people who are looking for lower price vehicles,” said Phong Ly, co-founder and CEO of iSeeCars.com. “We found examples of cars being advertised for much less than their market value or what they’re worth. The dealer’s hope is to lure the potential buyer into the dealership in an attempt to sell them a different car or the same car but on an expensive financing plan. It may also be that the advertised car has some major undisclosed issue or it could be odometer fraud.”
In fact, the car that caught your attention with the rock bottom price might not even exist. When you arrive at the lot the car looks like the one in the ad but the Vehicle Identification Number (VIN) is different.
To counter that trick make sure you bring the ad with you when you visit the dealer to inspect the car. Compare the car's VIN to the one in the ad.
Look into the dealer's reputation. Local consumer agencies may have records of any complaints. Online review sites like ConsumerAffairs often have local dealer reviews, particularly if there have been a number of issues.
If you are interested in a particular make and model, do some research. Check automotive sources to see what the market value is. While you don't want to pay more than the fair market price, paying significantly less is also a bad idea.