Tuesday, August 28, 2007

How to purchase a used car or van at 25% below Blue Book

I stumbled upon this trick just last week and thought I would share it.  I purchased a 2001 Chrysler Town and Country Van that had an average Blue Book value of ~$8750 for $6300, a 28% savings.  Here is the secret:

 

You want to purchase from a small independent rental car/truck business.  Most franchise rental agencies have special car purchase and sale arrangements with car manufactures and dealers.  They will only keep the vehicle a year or two at most and sell it through their network.  A small independent rental business has more incentive to get the most out of their vehicles.  In our case, the van in question was a 2001, had been used 6 years and had just turned over 100,000 miles.  The 100,000 mile mark seems to key indicator as to why this rental company was ready to let go of the van.

 

Before you buy, pretend to need to rent.  Go by the local independent car/van rental location, scope out the situation; see if they have any candidates that they many want to turn over in the near future.  In our case, we actually needed to rent a van.  Our old van the AC was broken and this summer we wanted to go on a weekend away with my parents.  We were looking for a cheap rental price and knew that an independent rental business would likely be much cheaper than the franchises.  The first place I called did not have any vans available.  The second place I called, which was primarily known as a U-Haul renter did.

 

This is important to note: The business we purchased from was primarily known for renting U-Haul equipment.  They also rented pickups and vans along with SUV’s with towing hitches to allow you to rent both a vehicle and a trailer if you wanted.  So don’t discard these types of places from your list of potential sellers.

 

As it was, we rented the van, drove it for 400 miles that weekend and returned it.  Upon returning it, my wife asked if they were going to sell it anytime soon.  The guy said they had been considering it.  My wife left our name and phone and said we would be interested.

 

Now this is another curious point.  We had actually rented the van so we had a high degree of confidence as to how it would perform.  I suggest that after isolating a potential sell/buy vehicle (remember ~100,000 miles) that you may want to rent it for a day to see how it performs.

 

When the business called a month or so later to indicate that they were ready to sell, the owner offered the direct wholesale cost of the vehicle.  I speculate that the reason for this approach is simply that he wants to minimize the effort to move the vehicle on.  This is the value of the vehicle if he were to have sold it into a dealership as a used car.  This value was $6500 for our particular van. Remember the business makes its return on investment on the rental. The end of rental sale is not a particularly large contributor to the overall profit generated by the vehicle.

 

Not one to purchase a vehicle without having a mechanic inspect it, I asked if we could take it to an inspection.  The answer was yes.  I stopped by and picked up the keys and drove it over to the mechanics.  This is the great think with doing business with an independent car/van rental agency.  He never asked for ID or anything, just gave me the keys and asked about what time I would be back.

 

The mechanic turned up about ~$950 worth of work that the van needed.  Quite a bit of the work was stuff that would normally be done at 100,000 miles.  I think this is the primarily motivator for independent rental agencies to sell at this point.  The mechanic was also nice enough to work up the average Blue Book value of ~$8750 (this includes the high mileage discount).  He did that with me over at the checkout counter averaging the retail value and trade in value of the van.  He also mentioned that it needed new tires.

 

The final deal: Armed with the knowledge from the mechanic I counter offered.  He would not give credit to the mechanical maintenance, but did concede some of the cost for new tiers and the final price was $6300. The final value was 72% of the average blue book value.

 

My suggestion is simply look for that 100,000 mile candidate at your local independent auto/van/truck rental business.  Rent it for a test drive.  Indicate that you have interest in a purchase.  Have it inspected. Leverage the information you have. Then do the deal.

 

One last note:  The van has 104,000 miles on it. My friend Arne has a van with 104,000 miles he is thinking of selling.  It is a KIA, a van that is in a lower price category.  It is a 1997 van while the one from the rental business is a 2001.  This indicates that the rental vehicle managed to put on miles 66% faster than the family owned van.  The take away is that the body condition of the rental van is much better than the family owned van.  Six years of regular vacuuming compared with ten years of children and dogs (cracked windshield, broke radio, stains in carpet and seats).  If I am going to purchase a van at the 104,000 mile use point, the x-rental van seems to be a great deal.

2 comments:

Van man said...

It's a good chance to buy van in such a good price. But I need van only sometimes, for example when I move, but I don't do it very often. So for me it's better, to hire Van man.

Nickolas said...

Thank you very much, it is very interesting. Usually if I need a van I'm using van hire companies. But my father want to buy something like van and this information will be useful for him!