Selling A Car Made Easy

Are you upgrading to a newer car and wish to get rid of your old vehicle? However, what if you do not have the time or energy to find the right buyer? Well, you do not have to look too far. You can now sell your car easily without really going out of your way.

With technology becoming an integral part of people’s daily lives, life has become fairly simple. Tasks, which normally would require a lot of time and physical sweat, can now be done easily sitting back at home. The internet medium has especially revolutionized marketing.

Traditional Methods to Sell Used Cars

Earlier, the most common way used for selling a car was advertising the same in local dailies and newspapers. The seller then had to wait to receive replies to the advertisement. After scrutinizing the responses, the seller also had to ensure that he was available at all times to attend to all buyers who came to inspect the car.

In such cases, the vehicle has to be maintained in a good condition to ensure that there are no problems when the buyer comes in for inspection or trial run. This can result in unnecessary maintenance costs to attract the buyer. This also does not necessarily fetch the right price for the seller.

Another way for selling a car is trading it in with the dealer for a new car. However, it has been largely observed that the exchange price offered for a used car is considerably less than what it is actually worth.

Online Selling

People sell their cars for different reasons. It could be due to upgradation to a newer model/variant or due to relocation to another city or just due to financial needs. Whatever may be the reason to sell, the seller would like to procure the best price for his used car.

Selling a car is no longer an arduous task. Finding buyers has become easy through the presence of online dealers. The seller does not have to put in too many efforts to sell his vehicle. The traditional methods of selling used cars have been overtaken by modern selling ways.

There are a number of online dealers who offer free car valuations for second hand cars. The prices offered by them are generally competitive. In addition to this, they also offer many complementary services, such as free pick up of the used vehicle. Moreover, they buy the car on a ‘as is where is’ basis, thus saving the seller from incurring unnecessary refurbishing costs just to lure a buyer.

Choosing the right dealer for second hand cars is of utmost importance. The online dealer should have a reputation of honesty and integrity, wherein the seller is not shortchanged.

The Lemon Principle and Market Failure In The Used Car Industry

Imagine if you are shopping for a used car, and suddenly, someone came up to you on the street and assert a bold claim, “The used car market has only low quality cars for sale!” Would you have agreed with this statement?

Well, there are reasons to believe that this statement has got a ring of truth after all!

According to the seminar paper titled The Market For Lemons: Quality Uncertainty and The Market Mechanism written in 1970 by George Akerlof, Professor for Economics at the University of California at Berkeley, the market failure in the used car industry and hence, the assertion that only ‘bad’ cars can exist in the used car industry, can actually be mathematically proven. This paper even won him the Nobel Prize in 2001!

In this paper, George used the term Lemons to denote used cars of poor quality (Lemon is actually an American slang used to represent a bad car), and the term Peaches to denote used cards of good quality. Sellers who sold used cars to the used car market knows full well the quality of the car he is selling; sellers know whether he is selling a Lemon or a Peach to the used car market because he has driven his car before.

Unfortunately, buyers of these used cars are unable to ascertain the exactly quality of the cars; their knowledge of the quality of these used cars are not as complete as that of the sellers. In other words, there exist an asymmetric information between the buyers and the sellers; the sellers know more about the quality of their car than the buyers.

This difference in knowledge and information with regards to the quality of the cars has huge implications with regards to the pricing of the cars and what kind of cars get transacted. Sellers who know full well that their car is a Peach will want to sell their cars at higher prices, while sellers who know full well that their car is a Lemon will be willing to accept a lower price to sell off their low-quality used car.

But because the buyer is unable to ascertain the quality of the car, he will thus be unwilling to pay the full price commanded by the seller who is selling the Peach, and will end up paying somewhere lower than the reasonable price than the Peach commands.

Let me illustrate this buyer-seller dynamic using a short example.

Imagine if you are a buyer of a used car. You met Patrick who wants to sell you his Peach. Because Patrick knows that he is selling a Peach, he will demand a high price (let’s say $20,000) to sell off his car. But because you, the buyer, is unable to ascertain whether this car is a Peach, you are thus not willing to take the risk of paying him the high price of $20,000 to buy the car. You will tell Patrick that since there is a chance you might end up buying a Lemon, you are only willing to pay a lower fee of $15,000 for the car.

As a result, Patrick will not be willing to accept your $15,000 offer for the Peach he has, and the transaction is unlikely to go through.

But if Patrick knows that he is selling a Lemon, he will be willing to part with his car for $10,000. In this case because you offer $15,000, Patrick will gladly sell you his car and the deal gets concluded.

Note that I have simplified this example to show only the gist of the buyer-seller dynamic. $15,000 is the average price buyers in the used car market will end up paying, and is calculated based on the expected value of a pool of cars, assuming that 50% of the cars sold are Peaches and 50% of the cars sold are Lemons, and that after aggregating all the prices of the Peaches and Lemons, the mean price of the Peaches is $20,000, and the mean price of the Lemons is $10,000. This simplified example can be mathematically proven.

Thus, the used car industry has failed because no owners of Peaches will want to sell their high quality cars if they know that on average, they will receive a fee that is lower than what their Peaches justify. But owners of Lemons will gladly sell their cars because on average, they will receive a higher fee than what their low quality cars can command. The Lemons have effectively crowded out the Peaches, the average quality of cars sold has declined to that of Lemons, and that market failure has occurred in the used car market.

Back to the statement presented to you in the introduction of this article, “The used car market has only low quality cars for sale!” On average, and in general, this statement holds true, at least based on the paper written by George Akerlof. George Akerlof termed this dynamic The Lemon Principle.

3 Tips For Used Car Buying

Used car buying can be a fun experience. After all, the vehicles tend to cost much less than new cars, and one can find a great deal on any model of car with a little work. However, it is quite easy for an inexperienced buyer to be taken advantage of. Here are three quick tips that can help even a first time car buyer make the right choices.

Do Your Research

Perhaps the most important part of used car buying is knowing what to look for in a vehicle. A good shopper will not only have some idea of what a vehicle should look like cosmetically, but also the realistic life span of the car. For example, a Mercury Cougar with ninety thousand miles will be at the end of its lifespan, while a Dodge truck might have quite a ways to go.

Make sure that you know something about what the common features are on a vehicle, its realistic lifespan, and what common signs of wear and tear are. Coupled with an informed knowledge of the realistic price of the car, this can help a savvy buyer get quite a good deal.

Check Out The History

One major problem that many buyers have with used vehicles is the simple fact that one often does not know what the car has gone through before purchase. Fortunately, there are a number of ways to find out the history of a vehicle before making a down payment. First and foremost, one should ask for some kind of car history report – the most common is from CarFax, but there are several other reports available.

If one cannot find this sort of third party history, one should ask the salesperson directly about the car’s history. If the answer is “it is in perfect condition” or something equally as unrealistic, the salesperson may be hiding a major defect. This is a prime situation in which one should go with their gut instinct over a sales pitch.

Don’t Be Afraid To Walk Away

New car buying is generally a very careful game of give and take, but used car buying tends to benefit from dramatic gestures. Used vehicles tend to have quite a bit more markup than a new car, and thus the dealer tends to have a good bit more discretion in setting a price. If the price you have found is significantly higher than the blue book value of the vehicle, it is time to walk away.

In fact, any price that sounds suspiciously high should be discounted immediately. Dealers make their living off of buying low and selling high, and they rightfully try to get the most money possible for any given used vehicle. As a consumer, your job is to find a price that will work for both you and the dealer. If you cannot come to an acceptable compromise, be willing to walk away.

Pros and Cons of Buy Here Pay Here Car Dealerships

Bad credit score may cause hassles for car buyers. BHPH car dealerships offer purchasers with bad credit score access to autos that they could not typically qualify for. Buy here pay here car dealerships will finance your car loan via their dealer. Instead of acquiring approved for a car loan via a lender, purchasers acquire and repay the loan via the buy here pay here car dealership.

There is nothing like the liberty and opportunity that having your own car gives you. For car purchasers with bad credit, BHPH car dealerships might be the only option. If banks have turned you down for a car loan checkout this website to find buy here pay here car dealerships near you. They know that low credit can stand in the way of getting a car, and they are here to help.

Hopes of owning a car can be ruined within instantly after many lenders have declined your car loan application. With the difficult fiscal times that we are upon us in the United States tons of car loan applications are rejected on a daily basis. The banks and finance companies use the credit scores to estimate whether an application is dependable to repay an auto loan. BHPH car dealerships can help high-quality persons who are having a challenging time. Banks and finance companies will not see beyond the credit score in an effort to help a person get a car.

Here are the pros and cons:

Pro: Buy here pay here car dealerships are readily accessible and increasing in popularity and are the quickest growing part of the auto sales market. They can found in all 50 states including: California, Florida, New York, Texas, Pennsylvania, and Illinois. Some cities with the most are: New York, Los Angeles, Miami, Houston, Atlanta, and Chicago have over a dozen buy here pay here car dealerships.

Pro: Buy here pay here car dealerships specialize in car buyers with bad credit. BHPH dealerships get the financial details out of the way first and aid buyers in determining how much you can practically afford to pay for a car. This is more advantageous than typical car dealerships that will first attempt to sell you a car only to discover later that you can’t get a car loan with bad credit.

Con: Buy here pay here dealerships are limiting in that the buyer can only pick from the cars that they have in inventory on at their dealership at that time. The amount of the buyer’s down payment will most likely determine the amount they are able to finance. You most likely have to choose a car that falls inside a particular price range.

Pro: Buy here pay here car dealerships will most likely pledge to finance buyers. This eliminates buyers the time of filling out car loan applications at dealers and being rejected over and over.

Con: Buy here pay here dealerships charge elevated interest rates than a bank would for a car loan. For purchasers with bad credit, BHPH dealerships could be their only source.

So is it an advantageous idea to obtain a car from BHPH dealerships? If you do have bad credit score and you need dependable transportation on a restricted finances then they are just want you need. If you do not have bad credit score buyers will find that a typical car dealer could be capable to offer you a more advantageous choice, a decreased interest rate, and a decreased monthly payment.