Driving into debt, or the price of learning?

Posted: May 11, 2009 in Blogging, blogroll, Cars, Consumer Issues, education, Life, Rip-off
Tags: , , , , , ,

So I have a young friend who would have done well to have been reading F4Y for a while. His situation isn’t as unique as it should be, but it is illustrative of things not to do.

  • He bought a car from a co-worker
  • He paid cash
  • He doesn’t have title for the vehicle.

All of this is bad enough, but wait, there’s more.  Let me back up a little bit.  My friend doesn’t know how to drive yet.  He has been practicing with his girlfriend, but he doesn’t feel comfortable on the road, so he doesn’t have a license.  Buying a car should have been very low on his list of priorities.

A co-worker bought a car earlier this year from Craig’s List.  The car is a 1993 something with only 60,000 miles.  The co-worker got at least one ticket for not having registration tags on the car.  The co-worker hasn’t got a smog check (a requirement for registration and transfer of title), and is waiting for a “light certificate”, which I believe to be a brake and light inspection (which is required for registering salvaged, junked, or “totaled” cars.

My friend paid cash for the car, and got the actual vehicle.  My friend did not get the registration, title, or anything else showing proof of ownership.  They didn’t even fill out a bill of sale.

So my friend was asking me about this issue the day after he parted with his hard earned money.  First, I told him that he might wind up okay in the deal, but I saw several red flags.

  1. No bill of sale.
    1. Without a bill of sale, there is no legal recording of the deal.  The seller could say that the car was stolen and get his car back, regardless of any money paid.
  2. Car was paid for in cash.
    1. Especially in the absence of a bill of sale, there is no way to track cash.  If my friend had written a check, even something as simple as a memo line saying “for purchase of car” would have given a little more security.
    2. An unscrupulous seller could say he never received any consideration for the deal, and my friend would be out of luck.
  3. The car itself worried me.
    1. A fifteen year old car with that few miles doesn’t seem realistic.  Unless the car was driven by an older person who didn’t use it often, the number is too small.
      1. If the car was driven by an older person, chances are that they wouldn’t sell the car via Craig’s List.  Most older people are (rightly) skeptical of that particular site, even more so in light of recent news items about it, such as rapists and murders using the site to commit crimes.
    2. The light certificate issue bothered me because I’ve done car loans and counseled young people when buying cars for years, and I had never heard of it.  My wife has a lot of experience in the area as well, and has likewise never heard of it.  When the two smartest people I know when it comes to finance don’t know about something, I start worrying.
      1. Upon further research, I found a brake and light inspection that is a requirement for salvaged, junked, or “totaled” cars.  These cars are notoriously difficult to maintain, since they frequently have more issues than the current owner is aware of, making what seems like a good deal a good deal more expensive.
    3. No registration of the vehicle.
      1. Registration on a 16 year old car is pretty cheap.  The ticket for not having a registration on a 16 year old car is way more expensive.  The only reason not to register such a car is because it is too difficult or expensive to do so.  Having a salvaged car without a title from a sale on Craig’s List would make it very difficult to register.
      2. Not getting a smog check on a 16 year old car tells me that the car probably wouldn’t pass a test.  If it doesn’t pass, it can’t be registered.

Each of these red flags are simple to address individually.  After the deal was done however, there is little that can be done to fix the problems.  Below is a brief list of things to look for.  This is by no means exhaustive, but doing these simple things will help avoid you getting taken for a ride in a bad car deal.

  1. Never pay for something that large in cash.
  2. Never make a deal without getting it in writing.
  3. Before any money changes hands, run a CARFAX report.  You have to pay like, $40 bucks to check on the car, but that is going to be money well spent.
  4. Avoid salvaged or gray market vehicles unless there is no other choice.  You won’t save that much money in the short run, and you will spend a lot more in the long run.
  5. Make sure the car is currently registered, and can be registered again.
  6. Take the car to a mechanic to look for any problems that might cost you a lot of money to fix.
  7. Avoid disreputable sales such as Craig’s List, several smaller dealerships, or anybody that offers a deal too good to be true.  Such deals are too good to be true in most cases.
  8. If you are not confident that you know all the in’s and out’s of buying and selling a car, find an older adult that you trust to help you.  There is no shame in learning from older people.  Even though I am running out of people older than me as I get older, I learn something every day from them.

I’ll keep you posted on whether or not my friend makes out okay with his new purchase.  I’m hopeful, but I’m also a little glad that he (hopefully) has learned a lesson relatively cheaply compared to what it could be later on.

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