Supply and demand is king in the car world. Too much supply and prices drop. Too much demand and prices increase. USA Today reports that demand has increased to the point that the “Average 3 Year Old Used Car Price is $30,000”. It goes on the report that the age of the average trade in has increased from 7.3 years to 7.6 years. Used cars are older and more expensive. Pretty much the double whammy of yuck.
Inventory being tighter means that dealerships are having to scramble to find inventory. Please understand, dealerships have to have cars on the lot in order to sell cars, so they are willing to bid more at auctions (gross), pay more for trade-ins (yay), and buy wholesale from sources they would not normally consider (bad). Realize that no dealership wants to buy a problem, but often, they don’t know it’s a problem.
Title washing is a real thing. How it works is pretty simple. My car gets totaled in Texas and the insurance company is paying me xyz for the car, so they get the title to the car and have the car sold at a salvage auction This is what happens most of the time. But, insurance also offers a second settlement: They will pay you a little less for the car and you can keep the car. MOST of the time, this payment is not much less than the bigger payment. I’m a pretty smart person so I do a little research and learn that I can repair my car for much less than what insurance is paying me so I take the smaller payout, keep my car and get the car fixed. I have a repaired car and extra cash in my pocket. The negative is that the car is going to be reported as a total loss.
Here’s where things get interesting. My car is titled in Texas. My car is totaled in Texas and the State of Texas has probably noted that the car is salvaged, but the title was issued before the car was totaled. In other words, when the car was wrecked, the only title issued was when I first bought the car and that title is “clean”. So the car is totaled but the physical title is still clean.
Six months later, I decide to sell the car, but I don’t want to sell it as salvaged because the value will plummet. What should I do? Sell the car in Louisiana. Either to an auction or better yet, trade it in at a dealership and buy a new vehicle. I hand the dealership my original title (remember, it’s a clean title) and the dealership now owns the car. The word salvage never comes up.
Most people would say, “The CarFax will show it as totaled”, but the fact of the matter is that the Carfax probably won’t show it as totaled because the insurance company issued payment but did not take possession of the car. The dealership is trading for a car with a clean title and a clean CarFax. They are doing nothing “wrong”. Y
And if the CarFax does show total loss, then there is always a car dealership that will buy the car simply because the title is clean. Remember, CarFax isn’t the law. CarFax has a reputation to uphold but knows they are not infallible. A clean title is the law. So you are being sold a car that has a “bad CarFax” but the title is clean. You are doing what’s correct according to the law because the law doesn’t care about the CarFax but only cares about the title.
Another fun thing these morally ambiguous used car stores do is hand you a “CarFax” from a different company. AutoCheck for example is a competitor to CarFax. Heck, there are several car history companies and I guarantee you one of those companies does not show the car as salvaged. Kleenex is my example. You sneeze and someone hands you a box of Kleenex. But it’s not the Kleenex brand but the HEB brand. We don’t care. Kleenex has become the word for tissue. CarFax has become the word for a vehicle history report. To most people, the brand name doesn’t matter because CarFax equals vehicle history report.
Why would a dealership work so hard to “cheat”? Because a salvaged car is worth 50% to 75% less than a car with a clean title. A $10,000 car with a clean title is only worth $2,500 to $5,000 once it’s totaled. That’s a lot of profit. A LOT of profit. Yes, a car dealership will scam you for profit.
And because inventories are low, it’s worth jumping through the hoops. Once I clean that title, I won’t sell the car retail. I’m going to take it to an auction and let 500 dealers bid to buy my car. 500 dealers who NEED inventory. At an auction, when demand is high, prices go up, so now I’m making a really nice profit by washing that title.
This article is a bit confusing to the reader and I apologize. It’s a convoluted, complicated subject full of gray areas and dark corners. This title washing process is something that is hard to catch when you are buying a car. Remember, dealerships are experts at selling. Experts at making abnormal things seem normal. They are experts at making your doubts seem insignificant or stupid or both. The funny thing is that because folks are so good at washing titles, the dealership probably doesn’t know the car was previously salvaged.
This is why we are here. Although not perfect, after 25 years in the car business, we’ve seen hundreds of little cheats. When we look at a vehicle history report, we look for more than just “insurance reported as total loss”. Inconsistencies in miles is a red flag. Registration in a new state is a red flag. A sale followed quickly by the car being traded in again is a red flag. There are several more things to consider. People we can call to “double check things for us”.
The car market is about to get weird. Supply is dropping while demand is staying the same so dealerships are going to be more resourceful. More resourceful at making money off of you. We are determined to keep that from happening to you. We are determined to find the best deal for you. NOT just price but quality of vehicle. Quality of dealership.
Texas Car Concierge is determined to give you a worry free car buying process. We are your automobile personal shopper who is going to make this a simple and easy car purchase.
