The $1.25k lesson on buying a used car in Nigeria.
$1.25k? Isn't that a tad much for a lesson? Heck it is. Unfortunately in life, these lessons are expensive. If those attending Babcock/ Covenant university's et al think that their schooling is expensive, they should try the school of life.
Background story (I think this would help you understand why I choose to buy a used car):
If you read a lot of personal finance books like I do (especially those written abroad), buying a used car is usually recommended when building your finances until you are settled in life and can afford to splurge on a new one. Business mogul, entrepreneurship enthusiast and chairman First Bank Nigeria; Mrs. Ibukun Awosika shared countless times how she rode taxis, how she didn't buy a new car when she started her business but got used ones instead to save costs. This sounded like a smart plan to save money and save for the rainy day. The only problem here is that we are living in Nigeria and this is 2017.
Abroad i.e US, UK et al don't have “Tokunbo” per se. They just have new cars and used cars. Period. So a used car could still have great value and mileage. But in Nigeria, the term “used cars” refers to at least 2 very different categories of cars:
- The foreign used cars aka tokunbo which are the used cars (sometimes accidented) imported from foreign countries. The irony here is that people actually buy these and go about bragging they just bought a new car. I wonder what those who bought the new ones aka tear-rubber should do but I digress. These cars are usually pricey but with mostly low and less frequent maintenance although this narrative is changing.
- The used Nigerian cars which are mostly the foreign cars in (1) above which were bought have been used by at least one person in Nigeria (in some cases more than one person) and then put up for sale for one reason or the other. This category is further subdivided into first, second and third classes depending on degree of use. These cars are usually more affordable but with mostly high and frequent maintenance.
So if you are following my line of thought so far, you would understand my confusion: When a personal finance expert recommends you buy a used car to save money, which of the above are they referring to?
Back to my story, so I bought myself a Nigerian-used 1999 Mercedes Benz e320 (now you understand why I got a used car) for $950 (Foreign used was about $3,750 at the time). Badass ride abi? I thought so too. I also thought I saved money.
Why a Mercedes though? I would try to answer that as we go along and no, I am not a Mercedes freak or anything like that. The story of this car led to me to write this article on the $1.25k lesson on buying a used car in Nigeria. What are the lessons? Let's get started:
- Know your paper.
This isn't referring to money as the hip-hop and rap artistes say. It is referring to the car documents as follows: Vehicle License + Vehicle Insurance + Road worthiness certificate + plate number allocation document (for cars carrying new numbers) + change of ownership document between the current owner and the previous owner + tinted permit (for tinted cars) + police report + custom clearing papers (if the owners still has them) OR receipt of payment between the current owner and the previous owner + LMVAA (Lagos state government motor vehicle administration agency) tax receipts (usually 2)+ Hackney permit (if its a bus) + Affidavit for change of ownership + Treasury receipt + Revenue collector’s receipt + receipt of payment between you and the current owner + change of ownership document between you and the current owner.
Case 1: This is the best case scenario. If the car documents are complete and up to date. When you buy the car, the previous owner may be magnanimous enough to let you keep using his name and number plates on the car (Number plates are connected to identities now) OR insist on you getting yours. You can also use the car till the documents expire and then go get yours.
Case 2: If the car documents are expired but complete, its okay. Whether or not you intend to register the car in your name, you would have to renew all the documents to date in the name of the previous owner first before you can use the car. Afterwards, you can also go get yours.
Case 3: If the car documents are up to date but incomplete. Honestly, people with any form of connection are the most difficult people to buy cars from because their papers are hardly ever in order or up to date. They also fall into the category (2 and 4). Because they have connections, police et al would not bother with them but remember you the buyer do not have same connections and thus will be exposing yourself to unnecessary exploitation. I advise that you ensure the remaining documentation is done before you put that car on the road.
Case 4: If the car documents are expired and incomplete. This is the worst possible scenario and this was where I found myself. Out of all the documents listed above the previous owner only had three and all had expired in 2015. You should never ever buy a car whose papers are not in order no matter how great the offer is. Sometimes there is a reason the papers were not complete in the first place. Asides this, you may never be able to get all the documentation together again and it would always be a problem.
Update: You can buy a Nigerian-used car anywhere as the Nigerian used car market is largely informal. Anybody from your landlord to the president’s son can sell their car(s) to anyone, anywhere at anytime. This fact also means you are liable to buying a stolen car. The trick here is to know your papers. The papers to a stolen car would always have loopholes. Again, Know your papers.
This is a massive red flag.
2. Know your advisers.
Back to my earlier question; Why a Mercedes though? There are the “engineering reasons” of it being a great car, reliable et al, “whimsy reasons” of it having lots of swag, “economic reasons” of it being fuel efficient but none of these were my fundamental reasons for buying it. I bought simply because I was advised to. (Related: What feeds your advisory?).
If your advisor is a die-hard mercedes fan like mine was, he/she would give you a thousand and one reasons why Mercedes Benz is the best car brand in the world and the others are bla, bla, bla. If you were buying a new car altogether (I mean tear- rubber), this information could be useful but you are not so please let it enter one ear and stroll out the other one. So also if they were an Audi, Honda or Toyota fan.
Can I recommend any car brand? Not really. I don't have a favourite car myself but there is a reason there are far more Japanese cars brands (Toyota, Nissan. Honda et al ) in the used cars market and on the road than any other car brand.
3. Know your Car.
Buying a Foreign used car is a frigging lot of work. Buying a Nigerian used car is even much more tedious. I spent over 72 hours before picking up my car researching youtube for everything on the 1999 Mercedes Benz e320. I also had a check-list of things to look out for before I paid.
My lists helped but they were not thorough enough. You are advised to go inspect the car with a mechanic you trust but even with that, go with your own checklist and check everything! I cannot stress this enough.
I cannot put a sample checklist here as my car would differ from most cars out there but these are the general ones: Headlights, Indicators, rear brake lights, indicators, reverse lights, check body for dents, scratches, rust and repaint (there would be a slight difference in color from the rest of the car), interior, gear lever, hand brakes, dashboard indicators, inner lights, pedals, engines, steering wheel, power steering, gear oil, engine oil, door handles, central lock, bumpers, sound system, air cleaner, air flow meter etc. Buying a Nigerian used car implies you are taking on risk of some sort. You might at least know how much risk you are taking on and be prepared. Check if the number of the car is engraved on any part of the car, if it is, that automatically devalues the car even if it's in just one place.
Common statements made by mechanics and/or car owners are as follows (P.S: They are usually lies);
- The car is working perfect, there is nothing wrong with it. This statement is mostly true 1% of the time.
- The AC is not working, just refill the gas.
- About some device or thing not working on the car; ‘….it's just a small thing. you will fix it’.
- ‘The car is fine, I just traveled to……last week with it.’
And so on. When you have a list of all the things not working on the car, find out their prices in the market (ask your mechanic) and deduct them from the cost of the car offered by the seller. Then you have the price the car is likely worth and decide if its worth the risk.
4. Know your Value.
After unsuccessfully trying to fix my Mercedes, I decided to sell it. Then I realised there was an issue. Remember when I said there is a reason there are far more Japanese cars brands (Toyota, Nissan. Honda et al ) in the used cars market and on the road than any other car brand? When you finally decide to let the car go (and you will at some point), how fast you sell you car and at what price has nothing to do with whether or not your car is fine or working okay or how much you spent trying to fix it (btw, you should never spend money on a car to fix it for the purpose of selling it. Unless you are a car dealer, you would usually end up selling the car for far less). Rather how fast you sell you car and at what price is a function of the second (or third)- hand value of your car. Japanese cars seem to have far more value and are easier to sell than any other car brand. German cars (Mercedes, BMW, Audi, Volkswagen et al) unfortunately fail in this department. Most loyalists of these brands usually buy them new as the second-hand ones have several issues that would drain your pocket. Infact, the only person coming to buy your Nigerian-used Mercedes is someone who either has a biased adviser to that brand or has no other choice. The fact that you bought your mercedes for $3,750 does not mean anyone would be willing to buy it for even $1000 no matter how great a car you think it is.
I bought mine at $950, repairs et al totalled at $1250 and eventually sold mine for $250 to Cars 45. I am glad that car is out of my life and pockets for good.
With these few points of mine ladies and gentlemen, I wish you all the very best.