Saturday, June 23, 2012

Show me the CarFax...

I went to college at SMU, which is also known as southern millionaire's university. Although my father was by no means a millionaire, he worked hard to pay for my school and I was fortunate enough to own a new Acura Integra. For me that was more than I could imagine owning as a 19 year old… until I went to SMU and took a look around at all the Bimmers, Porsches, and Audis. It was a humbling experience and in many ways affected the way I looked at things for a long time to follow. Needless to say, I no longer wanted to drive my new Acura for much longer and as soon as I graduated I bought a Porsche…. on a $30,000 a year salary. So, it was used; very used. My first Porsche was a 1987 944 Turbo with 80,000 miles for the cool price of $7500. At that time, the market was about $15,000 for that car but of course I got a great deal. It was great till I flew to Miami, picked it up, drove it back to Dallas and found out the title was counterfeit and the car had been rebuilt. Where was CarFax at the time? Well, today we have not only CarFax but others like Autocheck and the all trusted internet. But is that a good thing? Let's see…

This week I had a chance to drive a 2010 Mercedes E350 with only 14,000 miles on the odometer. This particular car had to be one of the most beautiful E-classes I have seen; with a stunning gray over congac leather and panoramic roof and fully loaded with almost every factory option. So, what's my point? This car had a "bad" CarFax report and is listed by eCarOne at roughly 10% below its book value. So, what do you do with something like this? Do you walk away regardless of the discount? Do you have a pre purchase inspection done and take advantage of the price reduction? It's a tough decision and I hope to be able to shed some light here based on my past experience of purchasing and owning over 30 cars… that's right; 30 cars in a little less than 20 years of driving.

Surprisingly, the answer is much more simple than most make it out to be. A car's value is negatively affected by a bad history report much like a person's credit is negatively affected by a previous late payment or collection. Does this mean that car is junk or the person is a deadbeat? Absolutely not. It simply means that there is something in the past that needs further investigation. In the case of this particular Mercedes, the previous owner had an accident that required replacing one of the rear quarter panels. Given that this car had an original MSRP north of $64,000 it makes sense that any accident would have involved an insurance claim and thus would be present on the history report. So, what does this mean? Nothing… it means you would treat it like any other car… you simply have a competent mechanic perform a pre purchase inspection and go from there. To me, so long as the car is cosmetically and mechanically in line with it's age, that is all that counts. Does the car accelerate, handle, and brake like it should? Is it similar to other cars of the same make, year and model? If all is is true, then I thank the dealer for the nice discount and I take it. If not, then it's no different than any other car… I walk and look for a better example.

The problem today is that we have a bit of information overload and this just means we need to spend a bit more time analyzing this information and deciding what's important and what's irrelevant. Would I buy a car with a previous flood history? No, because a flood destroys so much more than you can see. But would I buy a car that had some sheet metal replaced? Why not?

The point of my post is to point out that a blemish on a history report means nothing until you further investigate it and fully understand the why and how of the report. And of course, it goes without saying that buying a car from a reputable dealer like eCarOne is probably more valuable than any history report. This sounds like propaganda but it is actually an economically supported statement. How? A history report on any car has a potential value up to the car's market value. For example, the value of the CarFax on this MB is potentially $50,000 today because that is the market value of this car today. On the other hand, for a reputable dealer to lose his good reputation the COST would be way more than what he could stand to gain in profit on one or two cars.  Thus, buying a car from a reputable dealer is in most cases the best protection you can get.

Good luck and happy test driving.

1 comment:

  1. I just love the car. I always demand for a free carfax from the dealer but I also get my own copies for only $2.5 roughly each vehicle history report from Vinaudit.