CHURCHILL ADVICE

Buying a Car in the USA – Generic Notes

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General

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There are lots of guides on Car Purchasing on the Embassy Web Site, with the majority of the information accurate – but there are, as always, idiosyncrasies to a car purchase here in the DC area for Embassy personnel, and it is my intention to point out a few things for your consideration.  With over nine years' experience here in DC buying and selling cars, I may know the odd thing or two, and I want you to learn from me (for free) rather than at your own expense. 

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UK Optics

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The first, and by far biggest mistake that most people will make (and why wouldn’t they?) is to attempt to buy a car using any UK optics. The car market here is different to the UK in so many ways.  Buy me a glass of red and I can wax lyrical ad-infinitum on this, suffice to say that you must approach this in a fundamentally different way. 

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Used Car Prices

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The most used document here in the USA is Kelley’s Blue Book (referred to as KBB) which is equivalent to Parkers or Glasses Guide from the UK.  The State Department OFM and Local DMV use a similar pricing guide, NADA for tax purposes (more later).  Used cars hold their value over here much more than in the UK.  This can be for a variety of reasons, but the lack of safety inspections (MOTs) in the majority of US states is probably the overriding one – so a car does not become junk, it just gets relocated to a US state without a MOT program. 

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Also, around the DC area, certain brands of car regularly outperform KBB (so why they don’t update their pricing I don’t know!) Mercedes, Audi, VW and Porsche are good examples, with the majority of (good examples) selling for above or way above KBB.  Range Rover is a great example – you will see many here in the DC environs, (and a price tag to match), but you will find very few examples just 100 miles west – you will need to go to NYC, Chicago, Florida or California to find a similar population to here in DC.  Similarly, you won’t find many lifted Ford F150 trucks here but every other vehicle in Walmart in Indiana there will be one.  Get the idea? 

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MPG – points for consideration

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A US Gallon is 15% smaller than a UK gallon (3.78 v 4.54 liters).  An automatic gearbox habitually uses 10% more petrol (gas) than a manual. US cars have stricter emission control systems than UK counterparts (who knew!). Just these 3 factoids rolled together account for your US mpg being 30% ‘worse’ than a similar UK equivalent.  But as gas is circa $2.80 a US gallon – frankly it is largely irrelevant.  Yep, this is one fact that you will need to digest from the outset. Even based on a 15,000 annual mileage, and assuming that an average car/van does 22 mpg here (urban cycle) you are going to use 681 gallons a year, (rather than a 30% saving and 454 gallons in the UK) so the additional spend is less than $500 annually.  Most tires here are harder compound than in the UK and will last for at least 50,000 – 60,000 miles (the Grand Touring tire on your minivan will last circa 70,000 – 80,000 miles) so you will save more than $500 annually in non-replacement of tires. See what I mean by mpg is almost irrelevant in the round?

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Full Service History – points for consideration

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You generally wouldn’t buy a car in the UK under 7 years old without a Full Service History, with at least the first 3 years stamped at the main dealer.  And you would have the old MOTs, a fist full of other service invoices and other useful paperwork to go with the car.  This generally does not exist over here. An average American would not think twice of taking their $120,000 new Range Rover HSE SC to the local Jiffy Lube (think Kwik Fit) for its 3,000 oil change (see my missive on service regimes!) and would never get the service book stamped.  Why? It just isn’t part of the requirement to sell a car over here and has virtually no effect on the used car price.  I am not agreeing with this premise; it just is the way it is.  So don’t expect any kind of history, even on a reasonably new car.  If it has some then it is a bonus, but don’t steer clear of buying a car just because of this fact. 

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Oil Change - It makes no sense

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Drilled into a US Driver is to change their oil every 3,000 miles.  This is largely due to a self perpetuating belief that if you change your oil regularly then your engine will last longer. And as oil is so cheap, flawed logic suggests that if you change your oil every 6,000 rather than 12,000 then your engine must last twice as long (er, no) and therefore change every 3,000 and the engine will clearly last for ever.  (I think you can see the irony and failed logic here). However, all Jiffy Lube type shops will always place a sticker on the inside of the windshield saying 'Next oil change in 3,000 miles' and many Americans just continue to do this. 

 

The self perpetuating continues because most US buyers are only concerned with regular (very over frequent) oil changes.  Additionally, Federal Legislation prevents European cars to be coded for flexible service regimes here in the US - so the exact same VW Golf that would do 18,000 to 24,000 miles or 2 years in the UK before the 'service change oil' display notification comes on would be coded to 10,000 miles and 1 year here - but worse, even the local VW Dealer will place a 'Oil Change in 3,000 miles' sticker on the windshield.  (Feel free to ask them why this is, and if they know more about oil technology and engine design than the German Engineers who made the engine - you will just get a stock answer 'Well, it's just what we recommend' - but there is no reason for it other than to extract $$$ from your wallet).

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Buying on Craigslist – buyer beware

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I would suggest that at least 1/3 of all the cars on Craigslist are distressed sales – the car will cost more to fix or maintain than it is worth.  It is exactly what you don’t want to buy when you first arrive here.  Another 1/3 of adverts are dealers masquerading as private sellers selling mostly auction cars (clues – the keys in the ignition have a (often yellow) paper tag identification, the carpets have a plastic protective covering over them as they have just been valeted, or paper floor mats, or the side walls of the tires have just been dressed and are unusually shiny).  There may well be nothing wrong with these cars (other than they are overpriced for what they are) but unfortunately the majority of these ‘private dealer’ cars are not able to be sold through their car business as they can’t warranty them as they have known issues (which is why the car ended up at auction in the first place!). 

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Often dealers just clear all the fault codes in memory (which can be done from a $20 scan tool) and then sell them on.  It takes around 100 to 200 miles for the majority of emission issue faults to reoccur (due to the complexity of the standard Federal Drive Cycle requirements that all manufacturers must follow) and the car is sold in a Walmart parking lot to you ‘as is’.  Their name is not on the title of the car, just the previous owners, (and they have done nothing wrong, other than trade in their old car to the dealers a few months back…) – so you inherit the car and its faults.  (I have a scan tool that can not only detect all the faults in every electrical system of the car, but can also tell if the main CPU has been recently reset, as the readiness monitors will show ‘not ready’). 

 

A classic example is a car which has done around 150,000 miles. It will be a V6, have 2 Catalytic Convertors and both are worn out at about 150,000 miles – each costing $1000 to replace.  The catalytic fail sensor is the very last sensor to set (or fail), as it requires at least 10 – 15 drive-cycles and 200 miles to sample the carbon monoxide prior to it giving a diagnosis on the state of the catalytic convertor.  A simple reset prior to your viewing will do the trick and certainly extinguish all warning lights – and you will be none the wiser for a good couple of weeks.

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DVLA V5 v Title and Registration

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In the UK you get a V5 Vehicle Registration Form.  If you lose it or the seller misplaces it, you pop down to the local post office and order a new one. 

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In the US there are two forms (Registration and Title) – but only one which is critical: the Vehicle Title.  The title is the ONLY legal document that shows the ownership of the car and what loans or HP agreements (Liens) are currently held on the vehicle.  A car without a marketable title is worthless – you have just bought a 2-ton paperweight.  No, really.  A title must be clean (not salvage, flood or fire damage) and fee from liens (on a VA Title it will say ‘No Liens’) – otherwise there is still debt on it and the car will not belong to you.  You will be liable to pay any and all debt before you can transfer the title into your name.  Do not, under any circumstance (other than through the Embassy OFM) attempt to buy a car without seeing the title.  If you must, take photo of it and email it to me – I will check it for you free of charge – and give you my opinion as to if it appears to check out OK. 

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The Vehicle Registration is a personal thing belonging to you and issued to you once the car is registered in your name.  That’s the thing (together with your license) that you give to the Police once stopped for a traffic infringement.  It must be in your car at all times – no exceptions or it’s a $100 fine.  If you are on Blue Tags then you also can’t have a Tag Frame (see FAQ 14) around your rear Tag, as it obscures your registration date decal – again, just FYI. 

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Vehicle Inspections

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A vehicle inspection is NOT the same as an UK MOT – but is as close as it gets.  Firstly, if you are on a Blue Tag then you don’t require to get it done, but if you are buying a car, please ensure you are focused as to what a vehicle inspection actually means: and it is idiosyncratic in the extreme. 

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DC - In DC a private owner does not require a Vehicle Safety Inspection.  So, if it has DC Tags then it probably hasn’t been near an inspection station because, er, none exist! What DC cars do need is an emissions certificate which is done every two years. 

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VA – A Virginia car requires an annual Safety Inspection and an Emission Certificate every 2 years (but must be less than 90 days from issuance for a new registration). A VA safety inspection costs $16 and takes circa 10 minutes to complete.  Sure they check all the bulbs, two tires and two brake pad sets (one from front and rear) and the horn.  The tester gets half the inspection fee ($8) per car and the dealership the remainder.   It takes him around 5 minutes to get the car in and out of the bay and do the paperwork, so you can see that this is nothing more than a cursory inspection.  A car will pass a Safety Inspection in VA with no operating Handbrake, ripped CV boots and significant rust – these are not part of the inspection process! 

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MD – A car in Maryland only requires a Safety Inspection once at the transfer of ownership and then never again.  Like VA, it requires an emissions check every two years.  The MD safety inspection is much more like a UK MOT, (but still not as thorough) and costs around $90.  So the cast majority of MD cars have not had a safety inspection for years – with some older cars being in the same family never having one from new – ever.  Technically the seller is supposed to put the car through the MD State Safety Inspection before selling (it is then valid for 90 days) but I have never actually seen this happen! All MD private car sales are ‘as is’. 

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Emissions.  All US cars have emission readiness monitors.  There are technically 11 of them but some are legacy and not used.  A car will pass the emissions test (referred to as a smog test in California and other Western US states) if all but one of the monitors are ‘set’ (or 2 if the car is pre-2001).  As soon as a monitor fails the engine light will come on in the driver’s console.  So, if the car has not been reset recently (or had a flat or disconnected battery – another great dealer trick) and the engine light is not on, then it will pass the emissions test.  Only six counties in VA actually require emissions to be done (Arlington and Fairfax do), so often if a car fails emissions, it will be sold to a resident living in another part of VA to register it there!

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So, now you understand the subtlety of a State Safety Inspection and the validity of an Emissions Certificate you will be better equipped to go forth and know what you are looking at when viewing a potential car – and what it should and shouldn’t have. 

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Buying from Carmax

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Carmax is an excellent place – there is no doubt.  It has a massive selection locally and they can ship any car from any Carmax location for either free or for a flat fee os $750 (Depending on windshield price).  I would certainly recommend a visit there in your first week or so to look about and see what’s on offer.  You are also in the knowledge that everyone is equal and pays the same price – the windshield price – there is literally no haggling.  I won’t get a better deal from there than you – I assure you.  But what you will do is pay a premium price for the car you are buying – typically $3000 more than the local market average trade price – but you get a clean car and peace of mind (for 90 days anyway).  Many have bought from there and are very happy.  Just accept that at the end of your tour you are going to take a hit on the delta between what you initially paid and what you will get back for the car at resale. 

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Buying locally from a Reputable Dealer

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This is another good option, and many main dealers will dealer match local cars up to 100 miles, and will be more malleable in their pricing.  In the US everyone wants a great deal, so they expect to discount 5% or similar once you get to the haggling stage.  There is a vast difference between a main dealer and a back yard used car lot. 

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Buying locally from a Used Car Lot

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The used car lot will buy all its stock from auction (where else does it get its cars from?) and then sell you the additional warranty (at an additional price!) to cover any and all eventualities – but bear in mind that most common warranties do not cover fair wear and tear – and that is where the cast majority of faults occur.  So, if it needs new brake pads, suspension control arms and front wheel bearings, then you are on your own.  It’s really only if the actual engine goes bang that they will cover you (but you will need to provide evidence of regular oil changes etc to claim – don’t you love it?) The fact that the car has allegedly ‘just been serviced’ before you drove it away is irrelevant, you are dealing with a third party warranty company whose job is to not to pay a cent more than they have to, so unless you actually have got the service paperwork from the used car dealer specifying an oil change in the last 3 months and in the last 3000 miles (and he won’t have a service bay there, he doesn’t service - just sells) then you have bought a 2 ton paperweight again, and additionally an expensive and worthless warranty.   I can’t stress this enough, the used car dealer will make all the right noises, but he is genuinely off the hook should a break down occur (less the US Lemon Law which for a used car is generally valid for 90 days).

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Buying Tips

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Ask yourself before you buy ‘How did this car end up here – at this lot?’  If the car was traded in at Carmax and is under 100,000 miles and 10 years then Carmax will generally sell it on unless they are overstocked on that model.  More than 10 years or 100,000 miles then this will car will go straight to auction.

Main Dealers generally operate a 45 or 60 day lot policy.  A car traded in will be valeted and presented for sale and will be there for 45 days (or 60) before it is either moved to another dealer belonging to the same group (e.g. Audi Tysons, Audi Bethesda, Audi Leesburg) or off to auction, as they want their stock to change frequently and not stagnate.  So the first question to ask a main dealer is how long has the car been there for (they are mandated to tell you) and ask for it in exact days (otherwise they will say ‘just a couple of weeks or so’).  Ask if they do a 45 or 60 day forecourt change out policy and then ask which of the cars are nearing this timeframe.  You are much more likely to get a good deal on one of these as the alternative is the car just goes to auction at a reduced price – and you have already identified yourself as asking a question that 99% of used car buyers would never think to ask.  Help him to get rid of that car and you may genuinely get a great deal.  And there are genuinely seasonal variations – buy a SUV 4WD in April or May and you will get a great deal, try it in Oct and everyone wants one.  The reverse is true on a convertible, of course. 

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Dealer Fees

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Every car dealer charges a 'Dealer Fee' IN ADDITION TO any price you think you are agreeing to.  This fee is either $499 or $699 in VA, and $299 in MD (plus tax!).  You will pay circa $50 for a Temporary Tag (the paper thing that is used for a license plate to enable you to drive it away then and there) and then possibly another additional charge for the title fee (processing the title) which may be another $100.  Just be aware that the price you are agreeing is in fact the price you are actually paying, as I assure you it probably won’t be – and this is not them being disingenuous, as most Americans know that there are additional dealer fees when buying a car – it’s hardly their fault that you don’t!

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Taxes

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So, you have a car now? Now the fun part – Title and Registration.  Generally, (less the Blue Tag A1 and A2 Visa Holders) there are 3 taxes/fees to pay:

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Sales and Use Tax. Unlike the UK, you will pay a Sales and use tax on a second hand vehicle just like a new one. 

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In Virginia it is 4.15% of the sales price and you will need a SUT 1 or dealer sales paperwork to get the right value for the DMV to figure out the tax. 

In Maryland it is 6% of the sales price.  You also need a notarized Bill of Sale. (I am a notary – use me!)

In DC it is 5.75% of the sales price (it used to also be 6%)

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Title Fee.  You will also pay a Title Fee to get a new Title.  In Virginia this is $10, in Maryland $100, and in DC $26.

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Registration Fee.  The Title fee is just to get the piece of paper saying the car now belongs to you.  The Registration Fee is what the DMV charge to actually register the vehicle and issue the metal tags and decals for them.  In VA it is circa $45.75/year, MD $187 (for 2 years) and DC $115/year.

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Other Tax.  So I said there are three taxes?  I lied.  There actually is a fourth – Property Tax.  Randomly cars (and boats!) are classed like houses and are subject to an annual tax from the specific county you live in.  You will get a tax bill from the local county around 4 weeks after title and registration.  As a NATO 2 visa holder you are exempt this annual tax – just email them back with a copy of your NATO2 visa page and you will be all done with this. 

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Disposing of a Car for A1 and A2 Visa Holders ONLY.

 

You haven’t paid any of the above taxes to drive around thus far, but when you come to sell your car, you will be subject to the DC Sales and Use Tax (5.75%), levied by the OFM, based on the NADA Trade Value of your car unless you sell your car to another ‘entitled person’ with an A1 or A2 visa who does not have more than 2 cars already.  Also, be aware that the OFM hold your Title, so you don’t have one.  This may seem not to be an issue now but you really can only sell your car to Carmax (for a pittance) or a fellow Visa holder who is au-fait with the process, as 99% of all private buyers WILL NOT buy a car without a title (I wouldn’t).  And there is a classic catch 22 here, as you have to find a buyer to submit the sales paperwork to the OFM in the first place and the OFM will issue a State Dept Title in the new buyer’s name. 

 

In sum, whilst with a complete explanation some local Americans may understand this process, many will steer clear of a sale like this, and for good reason.  Without the title they can’t register the car, and you will want the money for the car (or a hefty deposit) before they get the car in the first place.  And it takes at least 5 days for the OFM to turn around the sales and title paperwork.  So really you are asking a stranger to buy a car that they can’t immediately title or register, and give you money without a title – can you now see the issue? 

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In sum, there is no solution to this – just be cognizant that if you buy a $12,000 car (which will cost you $15,000 at Carmax!), which depreciates say $4,000 over a 2 or 3-year tour, and therefore is technically worth around $8,000, Carmax will buy it at $4,000 (trade buy) or you would need to discount substantially below $8,000 value (say by another $2,000) to attract a private buyer who is willing to take a ‘risk’ and buy a OFM car without a title.  Either way, selling a car with an OFM title is, unfortunately, not easy.  Well, technically it is easy, just getting close to fair market value is almost impossible! 

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Summary

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Buying a used car here in the US can be daunting and I get this.  Feel free to reach out to me and see how I can help.

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