Most women know there is a 50% chance of buying a bad car when they go shopping for a secondhand one even when it shines so appealingly on a dealership showroom forecourt.

But who of us has heard of Akerlof’s economic law? Very few I’d suggest yet it applies well in the Used Car Market. I first read about this in Tim Harford’s book ‘The Undercover Economist’ – it explains that when one party to a sale has inside information and the other does not – markets do not work as well as they should.

Hence the 72k used car complaints recorded by Consumer Direct last year I suppose, costing innocent customers an estimated £85m to put right.

Take for example the case where a car dealer buys his stock of used cars, knowing fairly well from experience whether they are good or bad individual buys. Price, mileage (genuine or otherwise), service history, type of mileage, colour, condition; that sort of thing dictates the price he’ll charge knowing what he can make it look like with a bit of elbow grease and tlc.

But the customer doesn’t have the same background insight when she walks into the showroom. If she makes a low offer and gets the car, perhaps it was a lemon because the inside knowledge the salesman relies on is telling him that’s all it’s worth so take it… whereas a good car is worth more, hence his holding out longer for the asking price.

Clearly Akerlof knew his used cars (this works in other markets too of course) and that this is a hit and miss game that buyers and sellers play.

In general, used cars tend to be cheap and poor quality borne out by complaint levels in this area. Sellers want as high a price as possible so they’ll hold out for a better price for a good car but they can’t prove it is a good car so often the good car will sit around for longer.

Whereas a buyer who doesn’t understand the game goes away with a bad car unwittingly, thinking she has got a good deal. She hasn’t of course because the serious bills will start to arrive just as soon as any promising warranty runs out. That’s called Murphy’s Law. Marketers describe the sickening customer realisation that they’ve been shafted as ‘customer dissonance’ and I imagine we’ve all felt that at some time of our lives and determined never to go back…

The reality is that savvy car buyers don’t play a rigged shopping game like this one but there are many unsuspecting customers who don’t know the rules of the used car market and do end up playing here. Sadly many of them are females who trust the dealer who tells her what he needs to, to get the car off his forecourt.

Akerlof’s point is a serious one because this isn’t just a market where shoppers get ripped off, it’s a market that isn’t working properly because buyers want proof of value and VERY often sellers can’t prove this.

Of course the sensible advice is to buy a used car with a HPI type of finance check and then get it inspected for its mechanical fitness (at a discounted rate c/o DEKRA if you are a member of FOXY Lady Drivers Club) within the 6 months when you may be able to get a dealer to take it back or put things right, based on proof.

A reassuring female factor is likely to be an Approved Car stamp by a franchised dealership but the reality is still that the dealer salesman knows a lot more about the car than the customer and they need to sell it for as much as possible because their commission income is involved.

Certainly the customer needs more ammunition on her side so she can wise up in these instances. Depending on the value of the car I’d definitely counsel investing in checking out the mechanical condition of any secondhand car c/o car inspection experts, Dekra, as soon as possible after purchase; only then will you know if it’s a plum not a lemon.

FOXY Steph

Please see OFT advice here and remember that if you are a member of FOXY Lady Drivers Club we’ll help you sort any used car complaints out – the last resort is that we’ll share really bad feedback within the Club so that other women don’t go there in future.

It’s no surprise to me that women drivers are more apprehensive than men in garages and car dealers.  It’s not just that we feel unwelcome in many of them but it’s also because we are so often the butt of the joke, the topless pin-up insulted in the workshop, patronised even when we know what we want and, worst of all perhaps, overcharged or sold things we don’t need and wouldn’t have wanted had we known that, or been given a choice.

What the recession has done is increase the number of motorists actively planning to buy used rather than  new cars in the near future, so there is no avoiding the Arthur Daley’s and Swiss Tonis that do exist out there. With almost 50% of used cars bought by female motorists I am always surprised to find that so few get a proper used car check before buying – especially when from a private seller where they have no rights in law otherwise. Recent research carried out for FOXY Lady Drivers Club confirmed that only 20% had got the likes of an HPI check before buying used.

They then join FOXY to help them sort out the problems they inherit…  so we mustn’t grumble of course .

Now we hear that the Government’s Office of Fair Trading (OFT) is to identify the unacceptable  number of motorists who complain about used car sales to them (c68,000 cases to Consumer Direct  in 2008). This will take the form of a study into this £35bn market to see how its processes fare in terms of robustness, confidence and clarity.

I will be interested to see how this research develops.  The industry can certainly be improved but the solution isn’t easy. Think how the recommended service periods have been stretched and stretched  for new cars, so that cars get less attention in their early stages but operating costs are reduced and therefore more attractive to fleet buyers. In turn these business cars are then hammered up and down motorways (by and large good for engines…) but with the minimum of maintenance and servicing during the first three years or 60,000m. They are then dumped on the used car market at prices which reflect their future saleability.  And if the price is low enough, there’ll always be a market to turn a quick buck and pass it on regardless…

I believe the used car market needs an agreed minimum standard of  ‘approved’ used car status where we know that the car comes with a minimum  ‘quibble free’ 6 month warranty, ideally a 1 year warranty. There must be a way to do this that takes into account the selling price, auction situations, the (authentic?) mileage and whether the car has been looked after regularly (and that the service history stamps are authentic of course…).

Very few women seem to look at the service record before falling in love with a car and yet who of us can deny that a well maintained car (by a genuinely good garage) will be more economic to run in future and an all round better buy that the cheap car that has been flogged to death with minimum tlc in between.

And I hope the OFT study covers used car warranties too because they don’t all cover as much as you’d think.

I’d also like more motorists to know that a well maintained used car can be as green if not greener than a new car when you factor in the true CO2 costs of its production and delivery to the showroom. Those that can’t afford to buy new shouldn’t be made to feel inferior or to hear their cherished family car described as a ‘banger’ simply because they one that’s 10 years+, eligible for a £2000 backhander if they sign up to the ‘scrappage’ scheme and have it destroyed in exchange for a new car.

After all, we are encouraged to recycle and re-use rather than throw away and buy new. And fleet car buyers will continue to buy new of course which represents at least half  of the new car market.

Something for everyone there, to suit our needs and budgets.

FOXY Steph

“It is our responsibilities, not ourselves, that we should take seriously.”
Peter Ustinov