When shopping for a
used car one term that you may hear a lot is program car. Auto
salespeople will present a program car as being a nearly new car with very low
miles that you can buy for substantially less than a brand new one.
That is a good definition, but it's not always the truth.
So what exactly is a program car anyway. 90% of them are former
rental cars. Companies like Hertz and Avis buy cars in volume
directly from manufacturers under special fleet programs, thus the
program car name, and use them for daily rentals.
After a specified time in service, which can vary between 3
months and 1 year, the cars are then repurchased by the vehicle
manufacturer. The cars are then sent to a regional auto auction.
Program cars are typically sold to dealers only in closed
dealer auctions. That is, Nissan will only allow Nissan dealers
to purchase it's program cars. So if you find a Toyota dealer
claiming to have a Nissan program car you know something's up. Ask
to see a CARFAX on that vehicle.
Most program vehicles will have between 15,000 and 30,000 miles,
although a few will have 10,000 miles or less. Anything more than
30,000 miles should be considered high mileage for a car that is one
year old or less. If you are considering one with this many miles
insist on a substantial discount. No discount, no deal.
Warranties will vary from brand to brand, but all program cars
should still be covered by the manufacturer's warranty. Ask the
salesperson to give you the warranty details in writing. You can
also get a discount extended warranty online.
You may have a negative connotation about buying a former rental
vehicle. But, most rental cars go through regular routine
maintenance. All oil changes and tune ups are done as scheduled.
If the car needs a mechanical repair like brakes or a headlight
replaced it gets done.
The rental car companies have a major legal liability on the
line, and they can't afford to be lax on maintenance issues. Plus,
every time the car is returned from a rental it gets a fresh car
wash inside and out. Program cars are actually better cared for than
the average car on the road today.
This doesn't mean that you shouldn't expect to save some major
cash when purchasing a program car. How much you can save depends on
whether the car is a current year model, or 1 year old, and how many
miles on it. Program cars are never more than 1 year old.
So how do you determine what a good deal is on a program car?
Compare the price to what you can buy a similar brand new car for at
auto buying sites like Edmunds and Yahoo Autos.
You'll find a substantial difference in the market between
manufacturers. Current year model program cars from GM, Ford and
Chrysler typically go for about 50% to 60% of what you can buy a
similar new car for. Program cars from Toyota and Nissan will often
go for 80% to 85% of what a new one would cost.
Always compare program car prices to new car prices. If
you can save a substantial amount of money then the program car
makes sense. If not buy a new car.
There are no rebates on program cars, so if the same car brand
new has a rebate be sure to take that into account. Base the price
difference on the new car after deducting for the rebate.
When financing a 2 to 3 year old used car you can expect to pay a
higher interest rate than you would for a new car. But on program
cars you can usually get the same interest rate as you would on a
new car. Check the interest rates and calculate your payment now at
Capital One or E Loan.
Note: If the manufacturer is offering a special interest rate on
a new car like 0% or 1.9% you won't get that on a program car. It's
usually better to take the rebate than the special financing anyway.
Watch out for dealers that try to pass a car off as a program
car when it's not. Most state Lemon Laws will require a
manufacturer to buy back problem cars. These cars are "repaired" and
find their way back into dealer inventories. While dealers are
required by law to disclose to you the car is a Lemon Law vehicle,
they don't always do so.
Some unscrupulous dealers will lie and tell you a car is a
program car when it is really a Lemon Law car. Always check with
CARFAX first. Their history report will tell you whether it was a
rental car or a Lemon Law car.
The CARFAX will also tell you if the car has ever been in an
accident, whether it was damaged in a flood or hurricane, or whether
the odometer has ever been rolled back.
During the 2005 hurricanes in Louisiana, Mississippi, Alabama and
Florida tens of thousands of brand new vehicles were destroyed or
submerged under water while sitting on dealer's lots. Not to mention
all the cars owned by individuals that were destroyed. Many of these
cars have been repaired and found their way back on to the used car
marketplace. If you buy a car that has been submerged under water I
guarantee you are going to have problems with it. Again, CARFAX is
your best protection against buying a flood damaged vehicle.
Not all manufacturers have program cars. Some that do are Nissan,
Toyota, Mitsubishi, Ford, Chevrolet, Buick Cadillac, even Jaguar.
Some automakers that do not offer program cars are Honda, BMW,
Acura, Mercedes and Lexus.
Normally carmakers prefer to sell to individuals rather than
fleets because it is more profitable. If they have production
capacity to meet 100% of retail demand plus fleet demand they will
sell program cars. If they can not produce enough cars to even meet
their retail demand they will not sell to fleets.
