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Buying an Used Car October 24, 2006

Posted by Laxmi Goutham Vulpala in Uncategorized.

Buying a used car can be quite stressful, I am shopping around for a cheap used car and I realise how cumbersome the whole process is and how it eats up lots of time.

There is an option to directly buy from a dealer and avoid all the hassles of buying from a private owner but then the cost difference is too big to ignore.

When buying from a private owner, Information Assymetry comes into play, Obviously the buyer cannot find out  everything about the car  in a small test drive and seller doesnt reveal everything he knows about the condition of the car.Taking it to a mechanic isnt an option in all cases.

Here is where I think most owners who maintain their car well and honest sellers  lose out. It is assumed by the buyer that car has more toubles than the seller is willing to reveal, and the buyer  will offer a discounted value based off the faulty assumption.

Looking up for values of the car in kbb.com and edmunds.com is another reason for my gripe. The spread of values of car on both sides is too huge  sometimes there is a 50 – 100% difference. So dont know whom to trust.  Also the “condition” of the car as an option is too arbitrary.How does the buyer evaluate between “good” and “fair” for a 10 year old car?

Looking up the VIN in CarFax does help to a certain extent to make sure that the car has a clear title and was not rebuilt



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