It’s easy to be tempted by the appeal of a 0% finance deal – but are these offers too good to be true?

News Corp Australia recently conducted an independent investigation into dealers advertising 0% finance and found the reality to be very different than what you might expect. In fact, the investigation found that buying a car on a 0% interest rate deal can end up costing you a great deal more.

Beware the attention-grabbing headline

Firstly, it’s important to understand that often these 0% finance offers are used as a tactic to lure customers into showrooms. The deals tend to be available on the less popular models, or those nearing the end of their line.

The vehicle can end up costing you more

That’s right, you’ll usually lose your ability to negotiate on the vehicles price on a 0% finance offer. The deals are typically offered on vehicles sold at full recommended price, including all on-road costs.

Buyers should also be warned that many low interest rate offers are only available over 3 years. This means the monthly repayments may be higher than that over a longer-term loan with higher interest.

Other common catches

Alongside the older models and more expensive purchase price, watch out for these other catches:

• The offer is often only available on older stock
• You could find yourself with a less generous trade-in offer
• Not always available on vehicles with upgrades and add-ons.
• Less flexibility with loan terms and balloon payments

How to drive a real bargain

Make sure you do your homework before purchasing on 0% finance offer. Compare the costs between loans including those available outside the dealership. Also, ask if the low finance rate is attached to the price of the car and if the price of the car is also negotiable.

Despite only being 3 months into 2016, online scammers targeting classified ads have already cost Australian sellers $260,000. This comes from 544 people who have reported being scammed online – but with many such scams going unreported the number could be much higher.

A number as high as a quarter of a million may seem like it has to be an anomaly, but throughout 2014 scams cost Australians almost $2,000,000.

The Australian Competition and Consumer Commission (ACCC) warned people using classified websites such as Gumtree, Craigslist or Carsales.com.au to buy or sell their cars to exercise vigilance.

The Scam

One of the most common scams comes from anonymous emails from people claiming to be legitimate buyers. This is what can make buyers more susceptible to these scams, as sometimes it can be impossible to tell the difference between a scammer and a legitimate buyer from the original email.

Reportedly, scammers start by sending a text to the listed phone number asking about the car’s availability but requesting the buyer replies exclusively by email.

At this point, there are no real warning signs to deter someone who is probably quite eager to sell their car. This encourages sellers to contact this supposed buyer, who replies with something similar to this:

Thanks for getting back, I’m cool with the price likewise the condition, I work with New Zealand Oil and Gas (NZOG) and we are presently offshore in New Zealand Taranaki Basin.

We do not have access to phone at the moment and that’s why I contacted you with internet messaging facility. I will be paying you through PayPal linked up with my Westpac bank account, please get back to me with your Paypal details, I have also contacted my courier who will come for pick up and deliver it to my place in Darwin after the whole fund has been cleared into your acct.

Dimitri Kulshitsky, manager of operations and security at Carsales.com.au reports that if the seller obliges and sends their payment details, the scammer would fake a transaction report to convince the seller that money has changed hands.

While PayPal can be very empowering for buyers over the internet, it’s no coincidence that the scammers choose it for their fake transactions. PayPal’s buyer protection means there is a delay in the transfer of funds, allowing time for the scammers to strike in one of three ways:

• Someone posing as a courier picks the car up before the payment is seen to come through. The payment never turns up and the car will be long gone in no time.
• The buyer demands a refund for their transaction. As payment was never made in the first place, sellers caught off guard think they are doing the right thing by refunding the buyer who never made a payment in the first place.
• The buyer claims to have paid more than the asking price and asks for the extra to be “reimbursed”.

Mr. Kulshitsky went on to explain the conmen’s methodology. He explains that scammers generally pretend to be from some sort of offshore or remote location, sometimes pretending to be a soldier deployed abroad, making face to face contact impossible. This helps the scammer keep their distance from their mark.

They also claim to have limited access to their phone or the internet, forcing their marks to communicate via written communication such as text or email. Again, this helps the scammers keep their anonymity.

Another scam that targets car buyers follows a similar pattern – the con artist poses as a seller desperate to shift their car as soon as possible. They promise to send the car via courier once payment has been made, but the car never arrives.

Top tips to protect yourself when selling/buying cars online:

• Be wary of buyers from abroad – This isn’t a xenophobic thing, I promise. It’s just generally advised not to sell to anyone that you cannot verify is real. Try and find a buyer you can meet in person if possible. Poor use of English language is not always an indicator of a scam, but frequently scammers will deliberate use grammatical errors to appeal to ‘the lowest common denominator’.
• Never give up your car before payment has entered your account – This is a no-brainer. No payment, no product. You wouldn’t expect to drive a car out a dealership before payment has been made, so expect prospective buyers to treat you thus. This is also why you should stay away from PayPal for important transactions, as it’s hard to track.
• If buying, never hand over money for a car you haven’t seen – Even if the seller is legitimate, there could be a whole host of issues with the car that won’t be revealed without close inspection. Never buy a car from an unknown source unless you can properly verify that it’s in the condition as described.

Buying a used car can easily be a hassle – especially if you are not a car aficionado. There are a fair few steps with plenty of opportunities to trip up or miss things out along the way.

At Platform Direct Finance, we help people Australia-wide afford the car of their dreams by setting them up with highly competitive car finance rates. But payment is only a small part of the used car buying process, so here are 10 Top Tips to help you get behind the wheel of your next car!

1. Calculate your budget

Before teasing yourself by looking around at cars you can’t afford, make sure you work out how much you can spend on your car. It doesn’t have to be an exact figure – you can use a bracket if you are willing to stretch your budget that little bit further for the right car. Just make sure it is realistic – the last thing you want is to get carried away and end up with a car you can’t afford.

The price of the car itself will take up the largest part of your budget, but don’t forget to include your insurance, registration, and running costs. You may also want to keep some space in your budget for regular maintenance and hidden or surprise costs.

2. Research

Once you’ve worked out what you can afford, it will give you a much better idea of what to look for, and what to expect in your price range. Research is essential to give you an idea of whether the cars you are viewing are priced appropriately. If you spot a car at a much higher, or even much lower, price than you should normally expect for that model then it is probably one to avoid.

There are plenty of resources online that will tell you how much you should expect to pay for a car, and how to take a cars age and condition into account when negotiating a price.

3. Find the right car for you

It helps to have a make or model in mind when looking for a used car to help narrow down the vast market of available vehicles. If you see a car you like the look of, look on the manufacturer’s website to get an idea of the full set of features as the advert is unlikely to list them all. However, be aware that used cars may be very different by the time they make it to resale, so read the listing carefully as well.

If you don’t have your mind set on a particular make or model, you may find it easier to compile a list of priorities – features you’d like, whether you prefer comfort or performance, particular shapes or model types, etc. You can then compare the cars you see while browsing to your list of priorities to see if they are a good fit for you.

4. Get in touch

Once you have found the car for you, get in touch with the seller. Make sure you arm yourself with plenty of questions – this is standard practice, so don’t worry if it feels prying. It is important you get as much information about the car as possible to avoid problems down the line or to give you the chance to pull out of the sale before making a payment.

Ask the seller:

• Why are they selling the car? Is it due to an issue with the car itself or are they just moving on to a newer model?
• How long have they owned the car? How many kilometers are on the clock?
• Has the car ever been in any accidents? Is the car damaged in any way?
• What condition is the car in? Has it been well-maintained? Has anything been replaced?
• Will it meet an RWC?
• Does the car have any “bad habits”? Are there any quirks or faults that pop up from time to time?

5. Arrange a viewing

If you are satisfied with the answers to the above questions, it’s time to see the car for yourself. Organize a meeting at a time that suits both parties.

If the seller is a private individual as opposed to a licensed dealer, make sure you meet them at their home address. Don’t risk meeting them at your own home or a neutral place – you can never be too careful when it comes to meeting strangers from the internet or from classified ads.

Take a copy of the advert with you for reference. Make sure you jot down any information that came up while questioning the seller too and bring it with you. This is so you can check the car is as advertised – the same amount of kilometers on the clock, the same amount of wear and tear etc.

6. Investigate the car’s history

Even if the seller seems trustworthy, it is always worth checking the car’s history to make sure it hasn’t been stolen, encumbered by an outstanding loan, or even written off in the past! The car might have a history that even the current owner is not aware of.

To check a car’s history, get the car’s VIN number and check it against the database of the state it was registered in. In some states, this is free. In others, you may have to pay a small fee – but it’s well worth it! Here are the websites for checking vehicle registrations according to Australian state:

• New South Wales, ACT and Northern Territory
• Victoria and Tasmania
• Queensland
• South Australia
• Western Australia

7. Check the car thoroughly

When viewing the car, give it a comprehensive inspection yourself. If you don’t feel confident that you will spot any mechanical problems, get an independent mechanic to view the car for you. This step is vital as it could reveal serious technical problems that could otherwise have gone unnoticed.

When inspecting the car:

• Check under the bonnet. Look for signs of oil leaks. Use a stick to check the level of oil – low oil levels could be an indicator that the car has been under-maintained.
• Make sure the car is well lit. Don’t just view the car in a dark garage or at night, as the dark may conceal dents, scratches or rust.
• Don’t be afraid to get down on your knees and check under the car. There may be rust or cracks. If you see any welding marks it suggests the car has been in a crash or has had some serious structural repair.
• Check the tyres. Make sure they are in good condition, and pumped up and with most of their tread.
• Make sure the wheels are properly aligned. The front and back wheels should be directly in line with each other. If not, this suggests the car has been in a crash or has suffered structural damage to the chassis.
• Start the car with a cold engine. This helps you see if the car has any problems starting so you don’t end up stuck in your driveway down the line.
• Check the inside of the car. Make sure all the seat belts work, any switches on the dashboard or steering wheel work, and that the seats move back and forth smoothly.
• Check the gaps between the body panels. If the gaps between the body panels aren’t equal it indicates they have been fixed or replaced.

8. Take it for a spin

When starting the car, take notice of how the keys feel in the ignition and if the engine starts up with ease. Before setting off, turn the steering wheel as far as it will turn in both directions, listening out for any banging or scratching sounds. Test the handbrake by pulling it on and then pressing the accelerator – gently does it! A working handbrake should hold the car in place.

When on the road, listen to the sound of the engine. If you can hear anything unusual this is a very good indicator of mechanical problems. Make sure the seller doesn’t try and distract you by turning on the radio or otherwise attempting to draw your attention away from any faults.

Once you’ve got going, make sure you test the car in as many environments as possible. This means try driving slowly through a town and fast down the motorway. Try driving on multiple road surfaces – tarmac, gravel, even a dirt track, to make sure the car is versatile. Use all the gears to make sure the gear changes are smooth.

9. Drive a hard bargain

Of course, it is natural that a seller will want to get as much as possible for their car. This doesn’t mean you should just accept their price blindly. Before going to negotiate, arm yourself with a list of faults that need fixing or work that needs doing to the car, and work out how much that is going to cost you to fix. Once you have the list, you’ll be in a stronger bargaining position.

A good trick while negotiating is to ask the seller to name the price, then reply with a lower price that takes into account the list you made above and stay quiet until they reply. The worst they can do is turn you down. Don’t feel you need to compromise your position out of politeness, and don’t feel pressured into paying more than you think the car is worth. Before you have exchanged any money you can pull out at any point.

10. Sealing the deal

If you are completely satisfied with the car and the price, then it is time to close the deal. Always get original copies of the paperwork, don’t settle for photocopies. This includes registration papers, the full-service history, and the logbook.

When the time comes to make a payment, make sure you get a receipt detailing the seller’s full details, in case any problems arise. Seriously, their full details! Some seller’s will ask for a deposit. This is fine as long as you agree to it.