Carlos del Rio
CEO
Credimotion
/
Expert Contributor

Safety in the Purchase of a Pre-Owned Car

By Carlos del Río | Thu, 09/15/2022 - 15:00

In a previous article, we established that the king of sales for the automotive sector is the pre-owned segment. A study conducted with just over 1,500 people asked where they feel safest when buying a pre-owned car:

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Measurement conducted in 15 states of the country, with men and women between 25 and 45 years of age where 95 percent owned a car.

Dealers = Car-branded dealers

Multibrand = Car lots, including so-called digital lots.

Intermediaries = Brokers (some of them can offer related services)

Private = Direct between individuals

As we can see, the vast majority continues to believe that buying a used car through the pre-owned floor of a brand-name dealership is the safest option; it is not for nothing that just one of the automotive groups with more than 40 years in our country sells more than 15,000 pre-owned units per year. People perceive a high level of guarantee when acquiring a car with them, even when the car is not from the brand that sells it. The general public really perceives total security in the purchase process. The dark side of this is that people think that the prices are highly inflated compared to other alternatives. At the same time, if you want to sell a car to them, hold on because they will offer you well below the market price. The final plus they offer is that you are dealing with a serious, properly constituted company that is not going to disappear overnight.

Regarding the multibrand dealers, there are over 1,000 pre-owned car lots (registered) in the country, including the digital lots. Even though they exceed the number of branded agencies, with respect to our sample, it is the second biggest bet because, like branded agencies, they offer a certain guarantee and a regular to good level of security; here the sales prices are a little more competitive, but the purchase prices are very similar. Our survey participants see it as a good option, which becomes the best in some states and the only option in some entities of the country.

For many years now in our country there have been so-called Car Markets, which are basically fenced and controlled by some people who check documents and your car to validate that everything is in order, where you leave your car on consignment (until it is sold) and they charge you a fee for the sale, even offering credit among other services. Among the intermediaries, since 2016, companies with "digital" proposals have been created where for a fee, they will review your documents and your car and help you sell it through their own marketplace or through other consolidated marketplaces. Regarding this last scheme, there are already around eight new ones that offer the same service, including credit and guarantees. The general public perceives a low to medium level of security with these entities, since even though some offer guarantees, there is still a certain level of risk in the acquisition of vehicles through this channel. With respect to the sale and purchase prices, if you want to buy a car through them, the prices are in many cases below the sales prices of the agencies and multibrands, so this channel is really convenient for acquiring your vehicle. With respect to selling your car to them, they are perceived as lowering the price to levels similar to those you get in agencies and multibrands.

The sale between private parties has been a constant in our country for various reasons: the documents of your vehicle are not in order, it has major mechanical issues, aesthetics, age, excess mileage, because the buyer pays you in cash to avoid paying taxes — in short, the list seems endless. But what is there to say about the sale prices? These are undoubtedly the most competitive in the market. They are up to 20 percent cheaper when you buy a car directly from a private individual, the transaction is fast and in most cases, you only have to sign a contract of sale between private parties. Unfortunately, this form of sale has a very dark side, but first some data.

In two marketplaces that among other things publish car sale ads in Mexico City, they say that nine out of 10 fraud attempts are related to car sales. Coupled with the very high rate of fraud by check or other means of payment that are reported monthly to the authorities, we can see that it is simply the riskiest way to acquire a vehicle. If you are looking to buy a car for the first time, I do not think this is your best option because the car may have hidden defects, have stolen parts or worse, be of illicit origin. That said, and even if it seems incredible, people take the risk of making a direct purchase due to the economic benefits that this represents, even when there are good alternatives (intermediaries) that are close in terms of cost. Today in Mexico, there are around 6 million semi-new units moved annually and most of these are operations between individuals.

Even though our results show that people believe that it is safer to acquire a vehicle through the first three channels, they still prefer to take the risk of acquiring it directly to save money.
In my very particular opinion, I see that more and more multibrand alternatives, digital, intermediaries, etc., are being created, which is very good to mitigate all the risks involved in the purchase and sale of cars in our country, but I wonder if they are covering more of those 6 million transactions or is it simply the same proportion but attracted by these new options?

Photo by:   Carlos del Rio