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Should a Nearly New Used Car Be an Immediate Red Flag?

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author photo by Doug DeMuro July 2017

Hello, Oversteerage, and welcome to today's round of Ask Doug, your favorite weekly column here on Oversteer, where you Ask Doug, and Doug tells you that you're wrong and he's right, regardless of the question.

If you'd like to participate in Ask Doug, you can! Just email me at OversteerDoug@gmail.com, and I will happily read your question and probably laugh at it as I select someone else's instead.

This week's question comes to us from a reader named John, though he asked to be called Reginald "for short." I'm not sure that JohnReginald understands what "for short" means, except possibly as a description of the vastness of his intellect, but I will nonetheless reprint and answer his question for you.

Good Afternoon,

My name is John, but I request I be called Reginald for short.

I am in the market for a new used vehicle. What I have in mind is a couple years old as the current model is the same and I thought I would save some depreciation. I found exactly the right vehicle. The color, options, condition is right, but it for sale at the competitors dealer. Say I am looking at a used Chevy at a Ford dealer for example. As a car guy who has made nothing but poor car decisions (mostly buying the most unreliable versions of reliable cars) I am wondering if this should be a red flag and I should run? Why would someone in their right mind trade in a vehicle after a year and go to another brand, unless it was a lemon? Should I run, or should I assume my luck probably will change and this one will be different. I look forward to your advice which I value slightly higher than my mother's who keeps telling me to "Find a nice girl and settle down."

Thanks and have a great day!

Reginald

This is an interesting question, JohnReginald, and I have a few answers for you. For those of you who don't want to read JohnReginald's ramblings, he's basically asking the following: If you show up at a Chevy dealer and there is, for example, a used 2016 Ford on the lot, isn't that car a lemon? Why else would someone trade it in at a competing dealership? Isn't it very clear that car was no good and shouldn't be purchased?

That thinking makes sense on the surface, JohnReginald -- but having spent some time in the industry, I don't think it holds up to further examination. Today I'm going to explain why.

First off, I think it's important to understand how dealerships get cars. Yes, trade-ins are a big way this happens -- but it isn't even close to the only way. An enormous source of vehicles at dealerships is used-car auctions. They are happening right now, at some vast lot in your city, near an airport, and they sell something like 40 zillion cars per day. Unless you bought your car new, it has probably been through an auction.

When I worked in car sales, we always pursued competitive vehicles (i.e. a Ford at a Chevy dealer) at these auctions for one simple reason: We wanted to have the competition on the lot. Say someone comes in to the Chevy dealer, and they're looking for a Cruze. Ehh, it's nice, but I want to drive the Corolla first. Well, it's great to be able to say... OK! We have a Corolla right here! That way, if they really want the Corolla, they can buy it from you. If they decide they prefer the Cruze, they can buy it from you. It's win-win, and it explains why you'll often see "competing" cars on dealer lots.

But then you're wondering ... why do these cars find their way to auction in the first place? You'd be surprised, JohnReginald, how many new cars end up back in the "for sale" world within only a few months of reaching a customer. One reason is fleet buyers: Companies that purchase company cars, rental cars, government cars ... they generally sell cars after a year or two. Same goes for automakers themselves. And dealership service loaners and demo vehicles also end up in the "used" mix when they're only a few months or a year old.

Here's another thing I've found: Some people just don't like the car they bought. Some people buy a car, drive it for six months, realize they can never get comfortable in the seat, or they don't like the color, or it doesn't fit their tuba, and trade it in for something else. This happens constantly. I once had lunch with a former CarMax buyer who told me he once had a couple who had just purchased the vehicle come in for an appraisal. That day. They left the dealer where they bought the car and drove straight to CarMax to assess whether they had got a good deal.

Needless to say, JohnReginald, I wouldn't really worry about a one-year-old or even a current model-year car on a dealer lot. If a car really is a "lemon," most people would take advantage of their state's lemon laws and get a full repurchase, not simply trade it in to a different dealer. Of course, go through your due diligence: Test-drive any car you might suspect of being flawed, and even take it to a mechanic if necessary. But don't worry just because it's a newer model at an off-brand dealership.

Doug DeMuro is an automotive journalist who has written for many online and magazine publications. He once owned a Nissan Cube and a Ferrari 360 Modena. At the same time.

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Should a Nearly New Used Car Be an Immediate Red Flag? - Autotrader