Let’s look an a common car-buying scenario
You need a new vehicle, and you’ve settled on what feels like a nice safe choice: a Toyota Corolla. You want something recent but not too pricey, so you’re shopping the 2017 model. At time of writing, that gives you almost 30 options in your area. How do you pick?
The obvious answer is to make some comparisons. You might set up a spreadsheet if you’re feeling extra organized, comparing the big selling points for each option: price, miles, trim level, key features, warranties, any fees you can find. If you’re really diligent, you might call each dealership to get a trade-in quote for your current vehicle, and add that to the mix too, if they give it to you. Then you can weed out cars that don’t meet your criteria and pick the cheapest option left on the list.
That might seem like a thorough, fair, and objective review process. In fact, it’s a great way to end up with an overpriced car in poor condition.
Here’s the problem
You don’t really know how much these cars cost or what condition they’re really in. One car on your list might only be available with dealer financing that’ll cost you an extra $2,000 over four years. One might have been shipped over from Montreal, where the salty winter roads corroded the undercarriage. Another might have been in an unreported accident. Yet another might have none of those problems, but cost an extra $1,200 up-front. Which is the right choice?
The list of things you don’t know is longer than you probably realize. Here’s a very partial list:
- Was the car driven in a wet or dry climate?
- Did the previous owner provide the required maintenance?
- Have all accidents actually been reported?
- How worn-down are the brakes, tires, wipers, and other crucial components?
- What’s the mechanical condition of out-of-sight components like the chassis and engine?
- Did previous owners smoke in the car?
- Did previous owners have kids?
- Is touch-up paintwork hiding scratches that will eventually need to be repaired?
- When was the last oil change?
- Does the car have a salvage title? (These can easily be obscured for cars imported from some other countries, such as Canada.)
And all of that is just the beginning
You are already a situation where you’re looking only at cars of the same year, make, and model, with the same number of miles on them and the same trim level. It all gets much more complicated when you expand the search—is a $1,000 price increase worth it to move from a Honda CRV to a Toyota RAV4? If both have been in a minor accident, which model tends to handle that better? And so on. Consumers simply don’t have access to these crucial pieces of information, even though they all affect the car’s roadworthiness, performance, value, and lifetime cost.
Then there’s out-the-door price
First, you need to know that list prices online are almost never accurate. Dealerships are free to change prices between listing and selling, and they have a long list of manipulative tactics they can use to obscure the real prices they’re charging you. The combination of financing restrictions, hidden and last-minute fees, service deals and required warranties, manipulated trade-in values, and manipulated sticker prices can easily add up to thousands of dollars…and, again, consumers simply don’t have any reliable means of collecting and comparing all of that information.
You’re actually comparing Apples to Oranges
The upshot here is unfortunate: no list of cars you put together will be a fair, accurate, level comparison. You’ll always be comparing apples and oranges in one way or another. What this means is that drawing up comparisons based on the listings you find online is a surefire way to let dealerships control the buying process. That’s the first big piece of the House Edge —the advantage dealerships have over their customers. In order to deal with it, you’ll need a fundamentally different way to shop, one that involves working with a trustworthy dealership that can give you access to genuine condition reports. Read more about that here.