Inflation sends buyers hunting for bargains in used cars

So you've just bought a used car! Well, stand back, you've got company. Nearly 3 out of 4 buyers of secondhand cars in the United States buy them as the family's No. 1 vehicle, according to the Hertz Corporation, which does a thriving business in selling off its rental and leased fleets at lots around the world.

Further, Hertz says, almost 1 used-car buyer in 4 has never owned a new-model car.

"Our research shows that cost is the central consideration in buying a used car," asserts William Welty, vice-president of used-car operations for the company.

Last year, US franchised auto dealers sold, both retail and wholesale, more than 9 million pre-owned cars, Automotive News, the trade weekly, reports.

Other millions were picked up on used-car lots from coast to coast or bought from individuals through newspaper ads, etc.

The older and less-desirable cars that are taken in trade on new-car purchases are wholesaled -- sold at a low price -- to other dealers at auto auctions held all over the United States. Those are the cars to be leery of.

Fewer than 2 percent of all used cars are sold directly by major fleets to individuals, although this category is growing.

So, with new-car prices on a steady grind upward, used-car buyers can pick up a two-or three-year-old car, often loaded with high-cost options, such as air conditioning and electrical and power work savers, at a fraction of the price of a brand-new car. The mileage may be low, too.

You may also save money on taxes and insurance premiums, although a bank loan will probably cost you more.

Among the prices paid, the Hertz survey reports, are an average $4,079 for a two-year-old car with 20,000 miles on the wheels to $5,034 for a one-year-old auto with 13,000 miles on it. The average price for all used cars, the poll says, was $3,602 and the average miles, 29,000.

And where do people buy them? Not from the used-car lots -- at least, not in the largest volume. Only 18 percent traipsed into a used-car dealership for a deal. New-car dealers are getting the bulk of the business -- 42 percent -- at an average car price of $4,196. The average price at a used-car dealership was from relatives and friends and 29 percent found another source for their cars.

The poll also found that the typical used-car buyer is younger than the new-car buyer, thus confirming that inflation is having a more severe effect on the ability of younger workers to keep up.

Other results of the poll:

* Only 34 percent of all used-car buyers said they had a trade-in when they bought their used car, compared with more than 80 percent of all new-car buyers.

* The income of used-car buyers averages less than $20,000 a year, significantly below the total family income of new-car buyers -- around $30,000.

* New-car buyers today hold on to their car for an average of five years, compared with the three-years-and-switch syndrome of a few years ago. Used-car buyers opt for a three-year swap.

About half of all the used-car buyers in the survey have two cars in the family, 24 percent have three or more, and only 26 percent have one car. By contrast, almost one-third of all new-car buyers have just one car in the family; 45 percent have two; and 22 percent, three or more.

Interestingly, while the imports claimed almost 30 percent of the new-car market in the US in July, only some 8 percent of the used cars bought are imports. Does this indicate that imported cars last longer, or just that import owners prefer to hold on to them for a longer period of time?

And how about a guarantee? Nearly half of all used cars had a written warranty, in contrast to 100 percent of the new cars sold. Yet the money saved in buying a used car could provide a financial cushion for bringing a car up to the mark, if necessary.

While buying a secondhand car may make good financial sense to some people, they're cautioned to be alert about whom they deal with. Many car buyers complain of being ripped off by a fast-talking used-car salesman who, with hat in hand, offers a limousine and delivers a lemon. The image of the automobile dealer, both new and used, is low.

The Federal Trade Commission wants to compel car dealers to inspect the used cars on their lots more thoroughly, assert in print that a car is either OK or not OK, and then stand behind the sale.

Meanwhile, do more used-car buyers pay cash for their cars? Perhaps surprisingly, about 60 percent buy on time -- about the same ratio as for those who buy a car new.