Private Party Pitfalls

A car is one of the largest purchases that a person ever makes. Some people like buying a car from a private party. If you ask why, you will be told they can get a better deal and save a few dollars. One of my customers traded in a truck that he had purchased on a street corner from an individual. This was an older truck, it didn’t look pretty, but it ran well and did that job that it was intended to do. We found out when we tried to sell it that the ID plate in the dash had been replaced. The number plate from a wrecked vehicle had been installed over the real plate. The id number was different from the one that was on the frame of the truck. He had unknowingly purchased a stolen truck. He then realized why his insurance company called his 2 wheel drive truck a 4 wheel drive.

This is just one of the problems you could face when buying a car from an individual. The car could have mechanical problems, could have been wrecked and rebuilt. There could be a lien on the car that wasn’t listed on the title. The title could have been forged. The best advice I can give when buying a car from a private party is to make sure the party you are buying it from is the party listed on the front of the title. If this is not the case, chances are you are most likely dealing with a “curbstoner”. This is a person who buys and sells cars to make a few extra dollars on the side. These people do not want to put the title of the car they are selling in their own names because they are only allowed by law to sell 3 cars per year. In this case there is the possibility that the car had been sold more than once between the person whose name is on the title, and you the potential buyer. Legally, if someone got a ticket driving the car and didn’t pay the fine, it could come back to bite you when you tried to register the car. If you do have a problem you are stuck with it.

The advantage from buying from a dealer is that the dealer is licensed and bonded. If there is a mechanical problem you have an implied warranty. If there is a title problem, he must correct it. You have legal recourse.

A large percentage of private party transactions turn out to be good, but if it turns out to be bad, it could be your worst nightmare.

I would like to hear your story, good or bad, about buying a car from an individual.

Education

My wife is a high school teacher and has been teaching for quite a while. Until you know and live with a teacher you do not realize the amount of work they do. They are required to have a lesson plan for each class every day. The plan is detailed to the degree it teaches various standards that are in the curriculum. A math lesson could also include language. A history lesson could include math. She is given one "prep hour" this is a class period for her to grade papers, do lesson plans etc. She rarely gets the days work done in that period because of other things like working for the student club that she moderates. The students different than in my day. The school wants to give every child an education and they give the student the benefit of the doubt if they are absent or late. the only problem is that you cannot force a child to learn. You can present the knowledge, but if the child doesn't absorb it, what can you do.

The students know that as long as they attend one class per day, they are counted as being at school. When a student has 5 or 6 classes per day, but only attends one, is that child really getting an education?

A student has to miss 10 class periods in a row in order to be dropped from the class. If they miss 8 and then attend three in a row, the clock is reset. That student will get an incomplete, but won't be penalized.

The students know the rules and some take full advantage. I am not saying all the students are there for social life and not for an education, but some of them definitely are. The classes are like any life situation. There are a small percentage of really good ones, a middle class that are around average and then the other small percentage that are there because they have to, not because they want to learn.

When the teacher has to spend time disciplining these students who don't want to be there, they are taking time that could be used to help and educate the people who really want to be there.

It is no wonder that a newly graduated teacher only lasts 5 or 6 years before burning out.

Automobile Debt Increases

I read an article in the Arizona Republic this morning taken from the LA Times that spoke of automobile debt. Debt that in most cases exceeds the vehicles worth. "todays average car owner owes $4,221 more than the car is worth at the time it is sold-up from $3,529 in 2002" . 45% of the car loans made today are longer than 6 years. Most cars are traded in between 24 and 36 months. This means that in order to get another car, the buyer needs to come up with cash to cover the negative equity, or the negative equity needs to be added to the new loan.

There was a time many years ago when you needed 33% down to buy a car and the balance had to be paid off in 2 years. It sounds terrible, but this was the era when a new car cost $3,000. The other side of the equation was that around $1.00 per hour was an average wage.

As inflation has kicked the price of a base car to over $10,000 you can see what has happened. You can probably buy the $10,000 car with $500 plus tax and title, the salesman has also sold you an extended warranty and credit life. You now owe about $14,000 on this car. The sad part is that the car depreciates faster than you can reduce the balance.

This doesn't sound too bad, but if you want something besides a Chevy Aveo, Hyundai Accent or Kia Rio be prepared to spend $15,000 up.

This state of the auto loan industry is very near the state of the housing mortgage industry. When you have no concept of having any equity in something its very easy to walk away. We see consumers who are looking for another car and buried in their present car. We ask what they will do with the present car, and the response is we are giving it back to the bank. Most lending institutions are realizing this and tightening up their standards on term, credit rating etc, but this is like putting a bandaid on a 3" gash in your arm. It will help, but not a lot.

My advice is the same as always. Get the car you want, put as much down as possible and pay it off as quickly as possible. that way when you do want to trade, your car will be worth more than is owed.