Monday, January 26, 2015

How Cars Are Sold on Craigslist

I've bought and sold a good number of cars on Craigslist (CL), so maybe some out there are interested in how it works and how etiquette plays a part. The first and obvious thing that is apparent is that buyers always want the lowest price possible and expect all cars to be in immaculate condition. Sellers want the exact opposite with regards to price, but they have a lot more information about the car than the buyer so that half-way plays in their favor. The game becomes trying to figure out a market price and then working the numbers by factoring in how bad the buyer wants to buy, how bad the seller wants to sell, and then integrating in the car's condition, history, and drivability to get to an acceptable price for both parties.

With regards to general market price, a seller is willing to go through the CL hassle because they either straight-up need cash or they were offered a super-low rape price at the dealer for a trade-in. Dealer trade-in prices are notorious for being horrid; from what I've seen they take a 'fair' KBB value and reduce it by 2-5k no matter what condition the car is truly in. They got to get their profit in somehow I suppose. So any price a seller can get above this trade-in price is realistically gravy for the seller. A good private party market price will hover around the 'good' rating. It will never bypass 'very good', but will rarely go too far below 'fair' either. The middle is the negotiation range and this can get silly, but it can be done.

Negotiation is expected, but after a seller starts high and gets no responses, they will usually keep on reducing the price every week or so until they reach their 'close to lowest possible price' that in their mind they would be satisfied with. After this, if the buyer is truly ready to buy they will be willing to go down to a max of around $600 if they really want to get rid of the car. All too often buyers will try to negotiate as if they were bargaining at a dealership and try to get 1-2k off the stated price; this is usually an auto-deny in the CL world.

I've seen around 6 main type of sellers on CL:
  • Type 1 = Seller only wants more money than they would get as a trade-in at the dealer.
  • Type 2 = Seller has a very niche car that is a classic, a garage queen, show car, souped up car, or something very rare. For these, this is where KBB doesn't truly apply since it's special in some way. These people are waiting for the right buyer, but that buyer may never appear. Usually these folks will only drop the price of the car so much or they will just pull the posting after they get no bites. It's rare that these folks are desperate. Picture an NSX and you'll get the picture.
  • Type 3 = Seller is an idiot and thinks that their car is worth more than it is. (Many postings are like this)
  • Type 4 = Seller is selling a car from Cali or some other state that has harsher smog regulations. Something is usually wrong with the car like it can't pass smog (but they won't tell you) or it has a salvage title (and also won't tell you until the bitter end).
  • Type 5 = Seller needs money bad. They will price their car near the "fair" range, and while the Carfax will check out, chances are that if the seller is that hard on money they probably weren't one the ball with maintenance either.
  • Type 6 = Seller is trying to get rid of a car that is a moneypit or otherwise highly problematic. These people will price low as well, but they are super sketchy when you talk to them or meet them.
The key with all CL transactions is to communicate a lot. Get as much info that you need before hand so that when you actually go look at the car, you'll just be verifying what the seller says. If the seller not forthcoming with information or flat out lie, just walk as there will most likely be other problems. The worst type of buyers are those who waste the seller's time by either joyriding (goes for a test drive, doesn't ask any good questions, and you never hear from them again) or go for a test drive or ask tons of questions and then offer something many thousands lower than the stated price. It's usually better to ask about how flexible the price is before you meet for a test drive.

The best sellers are Type 1 since they're usually only after a bit more money than a dealer would offer. They will usually post pics, a phone number, be quick to communicate, and will have a good amount of information about the car. Unless you feel super comfortable about the transaction, do the final xfer at a bank. This way the seller can verify the money and sign over the title in a neutral area.

There are many benefits of buying a car off of CL such as not having to deal with sales tax (in many states) and getting a car at a much lower price, but just use your gut feeling when dealing with people. If something seems sketchy, even in the slightest bit, just walk. Golden rule of life is that there are many more 'bad' people in the world than good.