Car Insurance

How to buy a pre-owned car

Why buy a used car? Why not? According to Robby Stamps, automotive consultant and author of the online used car buying guide, a recent automotive study showed that 45% of families earning $75,000 or more would consider buying a used car.

“The stigma attached to owning a used car is melting away,” Stamps says. “Because of the competitive climate to sell, cars now are a different animal. In the past 10 to 15 years, there have been tremendous improvements in technology, design, and metals.”

Cars are–to borrow a slogan–built to last, with lengthier warranty options. For example, you could purchase a 3-year-old car and it will still fall under factory warranty. Some warranties are good for up to seven years or 100,000 miles.

Why are many people still skeptical? Cars have advanced, but the depreciation curve, usually determined by banks, has not. “There is no reason why a 4-year-old car with 40,000 miles should be worth 35% less than when it was first purchased. That car is an excellent bargain,” says Stamps.

There are several places to buy a used car–new car dealerships, used car dealerships, auctions, and private sellers. Where you buy will depend on what you’re looking for and what you’re willing to spend. Used car prices could range from $1,500 to $60,000. New car dealerships are likely to charge the most for a car.

“Used cars are bought very cheap by the dealership, because the seller is usually anxious to get their new car,” explains Brooks, “so the markup is high. They tend to make at least a few grand in profit, with the consumer thinking they got a great deal. But a reputable dealership will sell sound cars and will offer financing.”

Used car dealerships offer the widest variety, particularly of hard-to-find vehicles. These cars come from various places, including auctions and leasing and insurance companies. You may have significant history to consider. But, Stamps says, mom-and-pop dealerships usually meet your specifications on a car, or come close.

Auctions can be a great place to buy luxury vehicles–but not a public auction, warns Brooks. The quality of the cars sold is questionable, and you typically won’t know what you’re getting until you’ve bought it. Contract with a dealer or auto broker to buy at a closed dealer auction. The contract fee ranges from $500 to $1,500, but you could save up to $2,000 on the price of the car.

Buying from a private seller could be the least expensive route, since most private sellers just want a decent profit. It can also be the most exhausting, since it requires locating, calling, and then visiting each one. The car’s history may be more questionable. Private sellers tend to mask the truth.

SAVVY SHOPPING TIPS

* Don’t believe just your mechanic. “Mechanics are notorious for misdiagnosing an auto problem,” offers Stamps. “Get an extended warranty to protect yourself. You will have to spend at least $5,000 to $6,000 to get a car that’s eligible for a warranty.”

* Don’t believe long-standing industry references as reliable sources. Stamps explains that “blue books” often list inflated retail prices to protect the car dealers, their biggest subscribers. “Many dealers advertise that their prices are below blue book rates. It’s a ruse to make consumers think they’re getting a bargain.”

* Establish a budget beforehand. Factor in car options, loan rates, and insurance. Stamps uses this as a guideline: Subtract your fixed expenses from your monthly take-home pay. Use one-third of what remains for your monthly car payment and maintenance.

* Never buy the first year’s production of a new model. Says Stamps, “No one knows for sure how a new model is going to perform in the real world.”

Before You Buy

* Do extensive test drives before you purchase any vehicle.

In the fall of 2004, Vasconi was meeting with other top executives of the company, one of the largest providers of marketing data to automobile manufacturers, in the boardroom of its suburban Detroit headquarters—in the heart of the U.S. auto industry.

It was a state-of-the-company gathering to discuss Polk’s strategic direction. And the consensus was that its information systems wouldn’t be able to support the business into the next decade. “If you have that discussion honestly,” Vasconi says, “it will scare the crap out of you.”

The Southfield, Mich.-based company’s business, at its core, is data aggregation. Polk compiles vehicle registration and sales data from 260 sources. These include motor vehicle departments in the U.S. and Canada, insurance companies, automakers and lending institutions. The company then repackages that data and sells it to dealers, manufacturers and marketing firms—anyone who wants detailed information about car-buying trends, such as the top-selling SUV for a particular ZIP code.

For years, Polk’s process of consolidating data ran on IBM mainframes. By the time Vasconi joined the company in 2003, portions of the software were 20 years old. “Some of the people working here are younger than the code,” he says.

The mainframe system wasn’t broken, per se. But the entire process was engineered around the batch-processing operations of a mainframe, in which multiple computing tasks are queued before they’re processed in order to maximize mainframe resources. Vasconi believed newer technologies could speed up delivery of data to customers—by processing data as soon as Polk received it, instead of in daily or weekly batches—and lower the company’s costs by automating tasks that were handled manually.

Vasconi also worried that the old system couldn’t keep pace with the proliferation of data. Polk’s entire database already comprises more than 1.5 petabytes (1.5 quadrillion pieces of data), and historical trends indicate it will continue to grow even faster. “We knew we had a capacity issue, and that getting the value out of the data would be a challenge for the company because of the sheer volume,” he says.

Customers, meanwhile, have been champing at the bit to get sales data more quickly. Paul C. Taylor, chief economist for the National Automobile Dealers Association, which represents 19,700 car and truck dealers, says Polk’s vehicle registration data by state is typically available 30 days after carmakers release their national sales data. That prevents dealers in, say, New Jersey from immediately comparing trends in their area with those nationwide and adjusting inventories accordingly.

“In a perfect world, you’d have the state breakdown when you have the national sales figures,” he says. “But if could take even a week off the cycle, that would be a vast improvement.”

Actually, Polk had tried twice before to move off the mainframe, but those projects ended up being scaled back. “It’s the mother of all databases for automotive intelligence,” says Joe Walker, president of Polk Global Automotive, the division of the company that sells data to businesses. “It seemed too daunting a task to try to move it.”

Company executives took a different tack with a project code-named ReFuel. In late 2004, Polk created a new company, called RLPTechnologies, to build the next data aggregation system. The subsidiary is 7 miles from Polk’s campus at a building in neighboring Farmington, Mich. It has a full-time staff of 30, and at the peak of development last year employed 130 contractors, including consultants from Capgemini.

“We wanted to free up the people who were going to build the next generation of what is, quite honestly, our cash cow,” says Vasconi, who is also president of RLPTechnologies.

Walker acknowledges that the expected cost of the project, which ended up exceeding $20 million, caused some trepidation. It was a huge undertaking for the private company, whose annual revenue is estimated to be around $275 million. “Right from the beginning, we were concerned with whether we’d see the ROI on this,” he says.

Polk expected the ReFuel project to save money. But only later did Walker and Vasconi confirm that it helped chop Polk’s costs for data operations management nearly in half.

A Blank Slate

After Vasconi hired a core team of 10 for the new subsidiary, most from Polk’s information-technology staff, his first task was to figure out what the new system would look like.

Dubbed the Data Factory, the new system performs the same three jobs that the IBM mainframe did. It first has to capture the data, pulling in feeds from the 260 sources. Then it must convert the data into a standard format, using a uniform structure and nomenclature so that, say, a Vehicle Identification Number as reported by the state of Texas is stored in a way that Polk’s other applications can read. Finally, the system needs to enhance the data by cross-referencing it with other databases—for example, verifying consumers’ names and addresses, or associating financing history with a particular vehicle.

Vasconi knew the system should have a service-oriented architecture, or SOA, which allows software components in different systems to communicate in a standard way. That’s because he wanted the flexibility to add or change pieces without disrupting the whole system. An SOA is also potentially more scalable than a monolithic architecture since larger tasks can be broken into subtasks more easily. In addition, Vasconi wanted to use grid computing, which harnesses multiple machines to work on a common task, as opposed to using high-powered, standalone servers.

“At the end of the day,” he says, “we needed to build something that will last 30 years.”

The RLPTechnologies team sketched out the functional pieces of the new system, and then determined those elements that were available as commercial software products and those they would have to develop themselves. “If we could find technology we could buy, we wanted to buy it in order to speed up our time to market,” Vasconi says.

The hardware building blocks of Polk’s Data Factory are Dell servers with Intel processors, running the Linux operating system. The two- and four-processor servers are configured into separate grids that handle different applications. One grid runs the Oracle 10g database; a second runs JBoss’ application server, for hosting custom Java code. A third grid runs Tibco Software’s BusinessWorks “messaging bus” software, which acts as the communications broker among other pieces of the system. The Tibco software provides the system’s SOA backbone.

The Data Factory incorporates other off-the-shelf packages. Software from Informatica turns incoming data into eXtensible Markup Language (XML) documents, which puts data into a common format. Polk uses software from DataFlux, a unit of business intelligence vendor SAS, to analyze data quality so possible errors can be flagged for investigation.

RLPTechnologies built the rest of the software it needed. Vasconi estimates that about 50% of the system runs on custom Java code—less than he originally expected. “The SOA architecture empowered us to go to the marketplace and find companies that had embraced the SOA approach and the supporting industry standards,” he says.

The main function the team needed to write itself had to do with “service orchestration.” This software looks at an incoming XML document and determines what actions need to be taken; for example, does the ZIP code in the address need to be appended with the extra ZIP+4 digits? The service orchestration software then submits the relevant portion of data from the document to the appropriate system to handle that task, through the Tibco messaging bus. RLPTechnologies also developed its own data access layer, which assembles all of the updated information and inserts it into the Oracle database repository.

In the fall of 2004, Vasconi was meeting with other top executives of the company, one of the largest providers of marketing data to automobile manufacturers, in the boardroom of its suburban Detroit headquarters—in the heart of the U.S. auto industry.

It was a state-of-the-company gathering to discuss Polk’s strategic direction. And the consensus was that its information systems wouldn’t be able to support the business into the next decade. “If you have that discussion honestly,” Vasconi says, “it will scare the crap out of you.”

The Southfield, Mich.-based company’s business, at its core, is data aggregation. Polk compiles vehicle registration and sales data from 260 sources. These include motor vehicle departments in the U.S. and Canada, insurance companies, automakers and lending institutions. The company then repackages that data and sells it to dealers, manufacturers and marketing firms—anyone who wants detailed information about car-buying trends, such as the top-selling SUV for a particular ZIP code.

For years, Polk’s process of consolidating data ran on IBM mainframes. By the time Vasconi joined the company in 2003, portions of the software were 20 years old. “Some of the people working here are younger than the code,” he says.

The mainframe system wasn’t broken, per se. But the entire process was engineered around the batch-processing operations of a mainframe, in which multiple computing tasks are queued before they’re processed in order to maximize mainframe resources. Vasconi believed newer technologies could speed up delivery of data to customers—by processing data as soon as Polk received it, instead of in daily or weekly batches—and lower the company’s costs by automating tasks that were handled manually.

Vasconi also worried that the old system couldn’t keep pace with the proliferation of data. Polk’s entire database already comprises more than 1.5 petabytes (1.5 quadrillion pieces of data), and historical trends indicate it will continue to grow even faster. “We knew we had a capacity issue, and that getting the value out of the data would be a challenge for the company because of the sheer volume,” he says.

Customers, meanwhile, have been champing at the bit to get sales data more quickly. Paul C. Taylor, chief economist for the National Automobile Dealers Association, which represents 19,700 car and truck dealers, says Polk’s vehicle registration data by state is typically available 30 days after carmakers release their national sales data. That prevents dealers in, say, New Jersey from immediately comparing trends in their area with those nationwide and adjusting inventories accordingly.

“In a perfect world, you’d have the state breakdown when you have the national sales figures,” he says. “But if [Polk] could take even a week off the cycle, that would be a vast improvement.”

Actually, Polk had tried twice before to move off the mainframe, but those projects ended up being scaled back. “It’s the mother of all databases for automotive intelligence,” says Joe Walker, president of Polk Global Automotive, the division of the company that sells data to businesses. “It seemed too daunting a task to try to move it.”

Company executives took a different tack with a project code-named ReFuel. In late 2004, Polk created a new company, called RLPTechnologies, to build the next data aggregation system. The subsidiary is 7 miles from Polk’s campus at a building in neighboring Farmington, Mich. It has a full-time staff of 30, and at the peak of development last year employed 130 contractors, including consultants from Capgemini.

“We wanted to free up the people who were going to build the next generation of what is, quite honestly, our cash cow,” says Vasconi, who is also president of RLPTechnologies.

Walker acknowledges that the expected cost of the project, which ended up exceeding $20 million, caused some trepidation. It was a huge undertaking for the private company, whose annual revenue is estimated to be around $275 million. “Right from the beginning, we were concerned with whether we’d see the ROI [return on investment] on this,” he says.

Polk expected the ReFuel project to save money. But only later did Walker and Vasconi confirm that it helped chop Polk’s costs for data operations management nearly in half.

A Blank Slate

After Vasconi hired a core team of 10 for the new subsidiary, most from Polk’s information-technology staff, his first task was to figure out what the new system would look like.

Polk had three high-level objectives, referred to in shorthand as “50/50/100″: The new system needed to be 50% more efficient; deliver data 50% more quickly; and aim for 100% data accuracy.

Several years ago, at a particularly stressful moment during a floundering family vacation, I spotted a filling station in Aberdeen, Wash., that seemed to be advertising refreshing caffe lattes and cappuccinos. Fancy beverages were already popular back home in New York, but they were purveyed exclusively in upscale coffee chains and restaurants. In Aberdeen, exquisite beverages were actually being sold in filling stations.

I remember thinking at the time that a “Lube-n-Latte” was one of those charming West Coast innovations that would never take root back east because East Coast natives could never get their heads around the idea of buying exotic coffees the same place they bought windshield wiper fluid.
I could not have been more wrong. Today, upscale coffee is available everywhere: filling stations, bookstores, laundromats, movie theaters, football stadiums, department stores. A $9 billion industry, coffee is now being sold at retail outlets that have nothing to do with the coffee business. And companies like Starbucks have successfully branched out into other businesses, such as selling their own line of music CDs.
What intrigues me about this cross-marketing innovation is why it hasn’t spread to even more enterprises. For example, why don’t struggling, imperiled or dying industries start selling coffee as a way of boosting sales? Take the American car industry. Steadily losing ground to the Japanese, criticized for its lack of innovation, and under fire from environmentalists, U.S. car makers have been having a hard time making a buck. The solution: Chai lattes. Unlike cars, coffee is a high-profit item that never needs to be recalled, so the trick of it is to lure customers into the showrooms by offering attractive rebates on less popular car models, and then selling them tons of coffee. Though car manufacturers will undoubtedly take a beating on the auto sales, they will more than recoup their losses by selling truckloads of Trans-Granulated Abyssinian Nectar.

What other businesses could benefit from introducing coffee to their product mix? Airlines, for sure, particularly since the friendly skies have long been renowned for their unfriendly coffee. Linoleum installers, without a doubt, could attract more walk-in trade. And how about unloading some of that excess fiber optic capacity that got built up in the late ’90s by packaging fiber optic infrastructure with some Kenyan Blue Mountain Shade-Grown Decaffeinated? With a Ray Charles CD thrown in just to sweeten the deal?
The possibilities in the cross-marketing universe are endless. Shopping for life insurance? How about a latte? In the market for a new server? How about a cappuccino? I see you’re looking over our deluxe coffins and urns. Care for a double espresso while you’re at it?

Obviously, there is only so much coffee that any one society can consume; eventually, we will reach saturation. By the time upscale coffee is being offered to scuba divers, astronauts and inmates of federal penitentiaries, the mania may have finally run its course. But why should upscale coffee be the only product sold by companies that are not in the coffee business? For example, couldn’t walk-in discount broker-age houses start selling haberdashery designed for unusually tall men? You’ve already got the client in front of you; you can see that he’s tall. Why not have the tailor take his measurements while you’re doing the paperwork? And couldn’t mutual funds start selling stationery or party favors? And why can’t cereal makers sell closed-end bond funds at the same time?

Purists who object to the “cappucinization” of American society may protest that we will one day reach a point where literally no commercial transaction can be conducted without a cup of coffee. Oral surgeons will package coffee with root canals; private investigators will purvey venti lattes to bail-bond skippers; Amtrak will ditch transportation and turn its aging train stations into Java Huts. This is a legitimate worry. But decades ago, America switched from being a manufacturing economy to being an information and service economy, and I can think of no good reason why 50 percent of the work force should not one day be gainfully employed in the coffee-brewing sector.

Agustin “Tino” Herran’s father and elder cousin gave him a tough act to follow. After all, how do you top building the nation’s largest Hispanic-owned supermarket chain from scratch?

Simple. You take over as president of the chain, Miami-based Sedano’s Management Inc. and, on the side, build your own multi-million dollar enterprises.
Sedano’s is on the path to book approximately $400 million in revenue this year, according to Tino Herran, whose other company, General Real Estate Corp., is a $400 million firm specializing in condominium conversions. He launched the Miami-based real estate development firm in 1994 with business partner and cousin Emiliano Herran and longtime business associate James Dorsy.
“My father obviously trusts the second generation,” Tino Herran says.

Entrepreneurship is practically a requirement in the Herran clan. Armando Guerra Sr. bought the first Sedano’s store in east Hialeah in 1962 after arriving from Cuba. Manuel Herran, Tino’s father, was a savvy 28-year-old cutlery salesman before he joined Guerra to expand Sedano’s. Cousin Armando Guerra Jr., recently launched Nueva Tierra LLC, a Coral Gables-based land acquisition company.

No doubt, the 36-year old Tino grew up privileged. The Miami native and scion of a wealthy family, was groomed by his father and Guerra Sr. to become a shrewd entrepreneur. Tino graduated with a bachelor’s degree in marketing and finance from Florida International University in 1992 and quickly set about leveraging his family fortune and connections.
“Tino’s a workaholic. He is relentless,” says Angel Medina, Regions Bank’s president of Miami-Dade operations, who has known Tino Herran since 1999 and in May nominated him for induction into the FIU business school’s Entrepreneurship Hall of Fame. “It’s not about advantages, but rather being able to take those opportunities and make things happen. When you look at Tino and his background, he’s really made a name for himself.”

At age 21, Herran launched his first real estate company, Arca Developments Inc. In 1992, he formed Tire Group International Inc., a wholesaler in Miami that today exports more than 20 brands of tires to 70 different countries and generates nearly $40 million in annual sales.

But Herran’s business career did not really take off until he launched General Real Estate. The company has invested in various projects, including high-rise condominiums in Miami, shopping centers in southwest Miami-Dade’s Kendall area, and about a dozen upscale single-family homes just south of Surfside near Miami Beach. The mansions, which are in the planning stages, are expected to cost between $3 million and $12 million. Herran, General Real Estate’s president, says the firm earned about $257 million in revenue in 2004 and should generate about $400 million this year.

In late 2002, Tino joined his father, Guerra Jr., Miami developer Sergio Pino and several others to form Miami-based US Century Bank, one of South Florida’s more successful new bank launches. Regions Bank’s Medina credits US Century’s directors, which include Tino, as a major reason why, in less than three years, it has grown into a $500 million financial institution. Each director, Medina says, has “tentacles throughout the community” and keeps the bank’s interests in mind while operating their own businesses.

“Tino is a true entrepreneur in that he finds opportunities in many areas and not just in a single trade,” Medina says. “He’s able to accomplish things in many diverse areas of business.”
Tino got his first taste of business at age 14 working as a bagger and stock boy in the Hialeah Sedano’s store. Dozens more stores, including Sedano’s brand pharmacies, opened throughout Miami-Dade and Broward counties during the late 1980s and 1990s and Tino eventually became a manager to help with the company’s expansion.

Today, Sedano’s has approximately 40 supermarkets and pharmacies combined–an expansion funded by Sedano’s profits instead of bank loans, Herran says.

“We’re not crazy out there opening up 20 stores a year,” he says. “We don’t like to have a lot of debt in the company. That flows into the [consumer] pricing, so that’s important.”

Herran’s father remains chairman of the family-owned supermarket chain but has scaled back his involvement with the business. “My main objective with Sedano’s is to grow it,” Tino says. “On a daily basis, I’m looking for new locations for us, negotiating new locations for us.” Though Herran is president, his cousin, Jose Herran, runs the day-to-day operations as vice president of Sedano’s.

Tino’s General Real Estate gives him a competitive edge, he says, because he can spot a promising Sedano’s site while looking for other kinds of property. Sedano’s executives study complicated charts and US Census figures to track Hispanic population trends in the region, all to figure out where to put the next store and what products to sell there. For example, Herran says the Sedano’s Doral store sells many products native to Venezuela to cater to the area’s heavy Venezuelan population. The chain’s Homestead store, its largest at 63,000 square feet, is heavy on Mexican products because of the large Mexican community in that area.