How Used Cars Yoostabee

Reminisce with more Yoostabees

I guess every car nut has had a "used car," lately known more fancily as "previously owned vehicle." It's likely your first car was labeled "second-hand" even if handed down in the family, like my first, a '49 Plymouth.

The history of used cars dates back to, well, when man first domesticated the horse. Up until a few years ago, the adage caveat emptor, Latin for “buyer beware," seemed to have been coined for the used-car purchaser.

Because it's in Latin, however, we know it goes back to ancient times, undoubtedly pre-Roman, and I speculate applied to used horses, camels, and bullocks. Then as now, personal transportation amounted to man's second biggest one-time purchase (housing comes first).

Remember the great scene in Friendly Persuasion, the movie about Civil War-era Quakers in Indiana, when Gary Cooper "trades down" for a sway-backed but feisty nag in order to out-pace his buddy?

Whether horse or used car, it's always been risky business.

Market of none

For a long time, there wasn't much of a market for used cars. Once Ol' Henry began turning out Ts in mass production, the volume went on for years mainly to supply first-time buyers replacing the horse. And then, in the 1920s, GM is credited with formalizing the used-car market for its new-car dealers.

Old Timers in the business, like collector and long-time Ford dealer Dick Duncan, remember when Chevrolet dealers displayed and advertised "OK Used Cars" and Ford copycatted with "A-1 Used Cars."

But there were no guarantees. Caveat emptor , even when buying from a franchised new-car dealer. In the old days, new-car warranties were three months or 3000 miles and there were no used-car warranties except the dealer's largesse.

During the Depression of the Thirties, used cars were a drag on the market. Auto workers even picketed used-car lots, accusing them of undermining new-car sales (and production) by prices so low it hurt new sales.

Fortune magazine had a major article on the "used-car problem" in June 1938, a setback year for the economy's recovery. The key fact was that new-car dealers were losing money on their used-car operations. The industry was divided on this. B. E. Hutchinson, the legendary Chrysler financial chief, told Fortune, "The manufacturer is not responsible for (the problem)." But GM was more realistic; according to William Knudsen, "When we can't sell old cars, we can't sell new cars."

To beef up used sales, the used-car "guarantee" was conceived. This was the infamous "30-day, 50-50," meaning if during the first 30 days after purchase of a used car something went wrong, then buyer and dealer split the repair cost 50-50. Right away that was a flim-flam, because the repair bill included the dealer's markups for parts and labor. So it was probably more like 75-25 — but better than nothing. It was the bedrock, for instance, of GM's programs for its dealers such as Chevrolet's OK and Pontiac's Good Will.

The big war for sales

World War II reversed the importance, and profitability, of used-car operations for new-car franchisees. No new vehicles were being produced for civilian sales, and the Federal Office of Price Administration (OPA) and rationing boards brought radical changes to motoring. Men (and some women) going into the Armed Forces had to sell their cars quickly at distress prices. Gasoline was severely rationed, especially on the East Coast, due both to war needs and losses from German U-boats torpedoing oil tankers. After the war, in the several years before new production caught up with demand, used car lots were a bonanza for their operators. Many new-car dealers got their start with used-car successes.

It "yoostabee" that regardless of where you bought your used car, it was legally Buyer Beware. I confess to being part of the problem. When my brother-in-law came back from overseas after WWII, he got a job as a traveling salesman and paid through the nose for a '41 Buick fastback in good shape with about 40k on the clock. When he went to sell it a couple of years later after obtaining a new Plymouth, I suggested he take it to a garage to turn back the odometer — a common if sinful practice. We both thought it was funny when the mechanic pointed out to him the mileage on the Buick already had been turned back at least once!

In the Fifties, used-car transactions became the stereotypical joke: “Would You Buy A Used Car From This Man?” Today, "pre-owned" sales are a bedrock of every new car dealer's operation. The used-vehicle market in the U.S. is estimated by R. L. Polk & Co. to be about twice the new rate, or 35 million units annually. According to one industry expert, Jerry Pyle, only 12 percent of the typical dealer's gross now comes from new cars. Profits on good used units can be better than on discounted new ones.

Among the reasons for used-car strength are far more durable new vehicles, continually rising new prices, and the availability of relatively low-mileage, well-maintained cars and light trucks coming off lease.

As you probably know, the key to competitive success in leasing is the "residual value," so it is very much in a manufacturer's interest to do what it can to beef up used-car values.

The Salt Years

I've had my share of used cars. Most turned out okay. Some I rejected, like the four-year-old baby-blue '59 Mercury Monterey which looked great on the street but, when elevated on the grease rack at Vinsetta Garage, revealed a floorpan and wheelwells with terminal cancer of the sheet metal. Those were the Salt Years around the Great Lakes.

My daily driver today is a '94 Continental bought off a Lincoln-Mercury lot when it was nearly three years old but still had a year-and-a-half and 20,000 miles on its original factory warranty.

So, what's new, you may wonder. Well, if I bought that Connie today, chances are it would come with a Ford-backed "pre-owned" extended warranty. Generally, this new class of used-car warranties are called "certified."

Now just about all makes sold in the U.S. offer a "certified pre-owned" warranty on own-make used cars sold by their participating dealers. The notable exception to availability is Chrysler Group, where the plan is still "under development."

Curiously, there are inexplicable detail differences from one manufacturer's program to another, in terms of qualifications, extent of coverage and percentage of dealers participating. I'm not going to attempt to sort out all the differences from one make's programs to another's but if you're shopping, my view is that the extended warranty is well worth any premium in the purchase price.

Mercedes appears to have led the pack in offering "pre-owned car" warranties as long ago as 1989. In the days when its sales numbers were modest, one might even say slim, Mercedes nevertheless always had a reputation for tracking its owners and keeping them happy long after the usual new-car warranty period. Today, MBUSA's pre-owned warranty can cover cars up to eight years old until they reach eleven years or 100,000 miles, and you can even lease one of the cherry-picked second-handers.

It appears the next round in the early Nineties went to some of the used-car superstores, offering some version of a plan similar to that factory-pioneered by Mercedes. Of course, independent vendor "insurance" plans had been offered by some new-car dealers for some years, but the shortcomings always were lack of factory backing and questions of transferability, claims procedures, and whether the underwriter was still around when you needed him. Not the kind of situation to instill great consumer confidence.

Both GM's Saturn and Ford's Jaguar launched pre-owned warranty programs in 1995, and Toyota followed in 1996. Indeed, Saturn is proud that its program is now embedded in the dealer franchise agreement. Although GM followed with its Certified program in 1996 for the rest of the corporation's brands, it has had at best only modest success convincing dealers to sign up. According to trade publication Automotive News, as of April only 18 percent of GM's 7200 dealers participate, compared to Toyota which has about 85 percent of its 1200 franchisees selling pre-owneds with the extended protection plan. (Since this article first was published, GM's numbers have swelled considerably.)

Ford was slower to follow but has been coming on strong since launching its new pre-owned programs a few years ago. (Land Rover has had a plan for more than seven years, predating Ford ownership and direction.)

A recent Ford dealer publication stated that Lincoln-Mercury dealers were obtaining used-car grosses (profits) nearly $1200 higher on "certified" pre-owned cars than those not so anointed. Dealers reported certifying a car — involving rigorous inspection and detailing — at a cost of $395 to $595 was well worth it.

Buyers of the certified pre-owneds from Ford or Lincoln-Mercury dealers get a break right away: the plan calls for delivery with a full gas tank, and continues with the same roadside assistance coverage offered on new cars.

That's a long way from when it "yoostabee" 30-day, 50-50, and Buyer Beware.