Car loan for salvaged title

When Clive and Suzanne Phillips of Ossining, N.Y., who own a ballroom dance studio in Manhattan, went shopping for a second car last year, they were looking for one reliable enough to make the 33-mile commute to the city and safe enough to transport their young son. The couple drove away with a 1997 BMW 3 Series, paying $25,181 for a car with just under 15,000 miles--about $10,000 less than they would have dropped on the new model. Still under the original warranty, their dreammobile even came with roadside service. "People saw our car and said, 'Oh my God, we could never afford a BMW,' " Suzanne says. "We thought we couldn't afford one either until we looked into it ourselves." The couple were so pleased with their purchase that they recently traded up to a secondhand 1998 BMW 5 Series with 24,000 miles.

Gone are the days when consumers bought used cars simply because they couldn't afford new. Today, they're also buying them because they want to. In the past few years, superstores like CarMax and AutoNation USA have tapped into the estimated $300 billion used-car business. They have sought to alleviate customer dissatisfaction with the experience of buying a used car. As leasing--which also took off in the '90s--continues to grow in popularity, so does the pool of two-, three-, and four-year-old used cars. And now cars are built to last. According to a study to be released this week by auto industry analysts J. D. Power and Associates, well-maintained two-to-four-year-old cars today are more reliable and less expensive to keep up than new cars were a decade ago. "Used cars have become more acceptable because of their quality and durability," says Sara Wong Hilton of J. D. Power. "They're stylish, they're a good value, and there's a wide choice available."

Steering clear of rip-offs. But all used cars are not equal. While you can get a quality secondhand car--"preowned," in auto industry parlance--for much less than a new car, your chances of getting taken are much greater than if you were buying brand new. This means you have to be a smarter shopper. "People used to say you don't want to buy a used car because you're buying someone else's trouble," says Bernard Brown, a Kansas City, Mo., lawyer specializing in car fraud. "After my 16 years of doing this, I take that warning more seriously than before."

Once you start shopping, the choices you'll find include leased cars coming off long-term contracts; certified cars, which have been inspected and reconditioned; rental cars; demos driven by dealership employees; company cars; and trade-ins off the street. You can find bargains in each category, but also some drawbacks.

Driving for deals. When Frank Marino recently checked out secondhand cars at an Acura dealership in the Chicago suburb of Orland Park, he was looking for a "great find" like the off-lease 1996 Honda Civic his dad bought last year. "It runs well, cost a lot less than buying a new one, and buying a 'leased' vehicle has a little more dignity than buying a 'used' car," says the 44-year-old teacher. "At least, it sounds better." Off-lease vehicles are the choice of many experts, too. "It's a poor man's way to buy more car than you can afford," says Keith Caldarera, used-car manager at Premier Autoplaza in Little Rock, Ark. They usually come fully equipped and boast just one previous driver, which means less wear and tear. Dealers and financing companies inspect the vehicles when they're returned to ensure that the mileage restriction was met--usually 15,000 miles a year--and to check for damage.

But off-lease vehicles can have a downside. "A lot of times when people lease a car, they're not as prone to do the scheduled maintenances," says Bill Bittles, dealer-operator of Austin Sports Cars Inc. in Austin, Texas.

Certifying cars, a growing trend in the car business popularized by superstores, has helped make off-lease cars even more palatable to consumers. Certification ensures that the few vehicles given this status are subjected to a multipoint inspection. Buyers drive off not only with a reconditioned car but with a bumper-to-bumper or powertrain warranty. Because the car has passed key operating tests, certification usually provides more protection than does an extended warranty. IntelliChoice (www.intellichoice.com) recently ranked the certification programs of 30 manufacturers to determine which offer the greatest benefit to buyers. Lexus, tied with Jaguar for first place, for example, offers a 36-month or 100,000-mile comprehensive warranty.

You'll pay for it. But raising consumer confidence costs money: A certified car can be as much as $500 to $1,500 extra. Not everyone believes it's worth the cash. "If you have that car inspected [by an independent mechanic], you've just had that car certified," says Remar Sutton, author of the car-buying guide Don't Get Taken Every Time. And there are no industry guidelines for certification. The key is to determine what the dealer is promising, to get it in writing, and to read what you sign, advises Tom Hudson, a lawyer who specializes in consumer financial services in Crofton, Md.

Another choice, rental cars, is generally a no-go according to most auto experts. Frequently referred to as "program cars," because they're programmed from the moment they're bought to come back into the used market, they come with fewer bells and whistles than most vehicles, have multiple drivers, and rack up heavy mileage--often in stop-and-go traffic. "I know how I drive them," says Sutton. But the price is often right. While a new 2000 Chevy Cavalier lists for $15,200, a used 1999 rental with about 16,000 miles sells for $11,500. Similarly, the 2000 Ford Taurus lists for $18,900, while the 1999 rental with 16,000 miles sells for $15,500.

Another option is demo cars. Although these vehicles are generally in good shape, take any car described that way with a grain of salt. "It's as likely to be untrue as true," says Brown, the car-fraud lawyer.

Corporate fleet cars, leased for sales and service people who make their living behind the wheel, can be expected to come back with 60,000 to 70,000 miles after two to three years. The average car accrues 12,000 to 15,000 miles a year. Yet, argues Darrin Aiken of Wheels Inc., a corporate leasing company, "They are meticulously maintained."

Many people in the car business recommend buying from someone you know or purchasing a trade-in, where you're more likely to find out the car's story--perhaps even complete with service records. But, cautions Caldarera, "if your salesman has a story for every car, beware." Brown even advises against buying a car unless you can actually speak with the owner.

It can sometimes prove difficult to get the straight scoop from dealers. It's still worth asking. Services like Carfax (www.carfax.com) rely on a car's 17-digit vehicle identification number for information, including mileage; if the car has a salvage title, meaning it was damaged beyond economical repair; and how it was previously driven.

Mechanics have seen it all. Experts urge having a used car thoroughly inspected by an independent mechanic before signing anything. "Don't fall in love with the first car you see," says David Champion of Consumers Union. A mechanic who knows the tricks of the trade can piece together a picture of how hard a car has been driven. Joe Kuhn, owner of Consul-Tech, an automotive consulting firm in Nokesville, Va., checks the gas and brake pedals to see how worn the rubber is relative to the number of miles. The color and odor of the hydraulic fluids are a giveaway to how well a car has been maintained. Popping the trunk can be revealing, too. "If the trunk is a disaster, it's sometimes relative to how the rest of the car has been taken care of," Kuhn says. "You begin to see the same thing in a lot of different places on the car."

Once you've decided which car you want, how do you know what to pay? Astute shoppers do not pay retail. "A lot of people think those used-car books are like the Bible, but they're not," says Jonathan Banks, editor of the Automotive Lease Guide. While guides like the venerable Kelley Blue Book and edmunds.com serve as a reference, you will never know what a dealer paid for the car to begin with. Sutton recommends that you find out the loan value--generally 80 percent of the wholesale price of the car-- from your lender. "You never want to negotiate down from the asking price," he says. "If you're always thinking up from the lowest number, you'll get a better deal."