What’s the Best Used Car Value Out There?

Recently, one of the managing members of DonohooAuto, Chris Donohoo, was asked a really good question: “What is the best used car value for a consumer right now”? You might be surprised to learn his answer was BMW. Here’s why.

“Two of the best values in the used car market right now are BMW 335 and 535 series 2008 to 2010.  These vehicles are overcrowding BMW service shops because of a HPFP (High-Pressure Fuel Pump) recall.  In California, where consumer friendly buyback laws are the strongest, BMW 335 and 535 vehicles are being returned and labeled “Manufacturer Buyback/Lemon Law” vehicles.  Are we as consumers and dealers to believe that California BMW’s are made in the special California lemon factory and these are inferior vehicles?  Of course not. These vehicles are the same as the laundry list of other wounded HPFP Beemers all across our the country.  The difference is these “California clean” Beemers were ruled academically ineligible to play for the Duke’s and Stanford’s  (Franchise BMW and Carmax’s).  They must go to the South Florida Bulls or Louisville Cardinals (Donohooauto or other savvy Highline independents)  to finish their careers…  Okay, enough of the NCAA basketball comparisons…  Allow me to digress…

BMW’s come on the market in five ways: lease return, local trade in, corporate sale, private seller and manufacturer buyback or trade assist (basically a buyback that escaped the wrath of having lemon juice squeezed all over it and demonizing its glorious existence).

Lease returns are offered to franchised BMW dealers first (at a really high rate). Depending on quality and market conditions they end up at physical auctions for dealers to fight over and pay top dollar for a vehicle that has been passed over a few times already. These vehicles are usually at the bottom of the food chain and are probably or most likely the lesser quality of the five brackets.  A lease return is basically a vehicle that was rented for three years.

One owner local trade vehicles are usually of high quality and very desirable, unfortunately there just is not the volume out there to support all of the dealers so most dealers keep a vehicle like this and sell it.

Corporate sale vehicles are a great buy and are held to very high standards by the factory (in this case BMW).  Usually, they are not allowed to be smoked in and have less than a year’s worth of driving.  However, market conditions can drive a very high premium for these vehicles and they can bring near new car pricing which defeats the purpose of saving on a used one.

A private seller is, in my opinion, the greyest area. You have zero accountability from the seller, so you better do your homework.  However, if you find the right one, it can be a great way to buy a vehicle.

And now, drum roll, please… Ba Ba Ba Ba….  Ta daaa !!! Manufacturer Buyback Lemon Law BMW’s!  These vehicles are one owner or even better, two owners (get to that in a minute) BMW’s that did not make it through the beach blazing, high desert cooking surfs up California high standard automotive academia. What do you mean, Chris?  Are you saying these vehicles are not lemons?  No, not really, California calls it a lemon, it’s their state, their laws, so, yes, it’s a lemon.  My answer to that is: so what?  Define lemon for me, please?  I’m listening.  Oh, the high-pressure fuel pump is bad and the engine is stuttering?  Wait, isn’t that same problem happening to the same 535’s and 335’s in Birmingham, AL,  and Topeka, KS,  and Dallas, TX and Newark, NJ, Anytown, USA? YES! So what about all these wounded Beemers coming out of Tinseltown and the Bay City? Stamp a lemon in the door jam and sell them for 75 cents on the dollar.  Sound like the admirable thing to do?  No, it sounds like the silly thing to do and who better to take advantage of silly consumer friendly lemon laws than savvy BMW customers who want to drive the solidly engineered twin turbo models BMW offers for far less than the going rate!!!

If you are not excited yet then let me let you in on a little-known secret.  These vehicles are usually ONE OWNER vehicles, not one owner off lease I don’t care what happens to this car I am turning it back in vehicles, but cars that were bought and owned and cared for like only OWNED vehicles can be.  If you are lucky, you will find one that was a two owner vehicle and Certified Pre-Owned by BMW of North America, why other than the obvious that it is a superior used vehicle…  2nd drum roll, please…Da Da Da Da…..   Ta Da!!!  Free extended warranty!!!  Yes, you get the same benefits of the CPO warranty as the consumer that paid retail money for a CPO car.

Allow me to analogize.  You walk into the stadium to watch Derek Jeter’s 3000 hit.  You are about to approach the ticket booth so you can buy a ticket to sit in the nosebleeds for $300 when you are approached by a rich snobby guy who says “Derek Jeter did not sign my ball, I don’t want my $1,000 ticket behind home plate, you can have it for 300 bucks, I am leaving”.  So there you are, sitting behind home plate watching Derek Jeter launch his 3,000 hit into the left-field stands for a fraction of what the disgruntled fan paid and everyone else around you.  Well, the same thing when you are whizzing down the road in your “Buyback” 335 or 535.  I should not have to sell you on Certified Pre Owned gig.  It does not take a genius to figure out that if the vehicle was certified four months earlier that it is probably not a lemon, instead,  likely a problem with the technician working on the vehicle or a recall that was forthcoming but unknown at the time.

In closing, lets put this in simple terms.  I am going to use the median price of $34,995 as the price the vehicle should sell for on the open market given it is the same vehicle and same quality.

Lease turn in Certified at the local BMW dealership                                       $37,995

Local trade in at reputable dealer                                                                   $34,995

Corporate sale vehicle sold closed to BMW dealers only                                 $36,995

Private seller just wants to get rid of it                                                            $34,695

For giggles, I will throw in a previously wrecked vehicle                                  $31,995

Manufacturer buyback Lemon Law                                                               $28,995

There is your spread.  As you can see, you get the same quality, if not sometimes better, with the buyback for a fraction of the price and usually the same benefits if not better benefits.” – C.D.

Tags: Cars, Information
Posted in Buying Guide | No Comments »