Buying a used car is very smart — if done smartly!
Purchasing a used car can be a very smart thing to do mostly because of cost savings and particularly if one pays cash.
Here are some tips that will help:
1. Do your homework. When you find a vehicle you wish to purchase, look up the book values in both NADA and Kelley Blue Book. Generally trade-in value is what you want to pay. Also search the Internet for common problems to watch out for. Arrange your financing ahead of time if not paying cash.
2. Always get a CarFax. This will help avoid vehicles with title problems and previous damage histories. A one-month subscription is the best way to go unless purchasing a vehicle from a CarFax certified dealer. A vehicle with a “branded” title (previous salvage, rebuilt, etc.) often will plague its owners with strange issues such as abnormal wear, electrical problems, and compromised safety equipment.
3. Have a mechanic check the car. Bear in mind that checks of this type tend to be pretty nit-picky. But that’s the general idea. Either you can negotiate to have important repairs done as part of the deal or use them to negotiate down the price. Also, this is a good time to think about safety or maintenance items such as tires and brake linings. Most importantly, depending on how confident the mechanic is about the motor and transmission, you can avoid costly repairs as well as the need for an extended warranty.
4. The year vs. mileage rule. Many people think that the best used car to purchase is one that has very low mileage because they assume it has very low use. This is not necessarily true and there are many parts such as belts and gaskets that simply are a function of age. In addition, highway miles cause less wear to a vehicle than in-town miles. Because of the low-mileage perception, it may be possible to buy a newer car with high mileage for the same price as a low-mileage older car. This is best illustrated if you look at the book values of different year models of the same car and you should be able to find the sweet spot between the two extremes. Generally newer is better.
5. Import vs. domestic. When deciding between import and domestic, there are two factors most people consider — reliability and depreciation. Unfortunately, neither of these really applies to used cars in the way people they think they do. Depreciation is a consideration when purchasing new cars because Honda,
Toyota and Nissan historically hold their value better particularly in the first 5 years. However, as used vehicles, the domestic product can be an absolute bargain because it often takes most of its depreciation in the first year. With respect to reliability, the domestic product has a bad reputation based on vehicles built in the ’70s and ’80s. However, since Toyota shared six sigma and process improvement technologies with the rest of the world, all vehicles regardless of manufacturer are dramatically more reliable. Most newer cars require no repairs and only occasional oil changes for the first 100,000 miles. Reliability considerations should include two other factors that are more important — age and cost of repair. Many import vehicles, because of the perceptions listed, can be more expensive than domestic vehicles that are 3 to 5 years newer. In addition, import vehicles cost more to repair (both parts and labor), and often require expensive maintenance such as timing belts. There is no substitute for homework. Find out ahead of time what to expect. In my experience, the most cars for the money is in domestic V6 built in 2000 or later.
6. Don’t buy extended warranties. Many aftermarket extended warranties are not worth the paper they are printed on. Even if you find one that isn’t too bad, most people, if they followed the instructions above, don’t need them. My advice is, if you think you need an extended warranty, you should probably find a different car. Still, we occasionally sell a few warranties and there may be circumstances where they are worth gambling on. But these should be rare exceptions.
7. Program vehicles. Any used vehicle that finds itself back in the possession of the manufacturer is a program vehicle. The majority are rental repurchases, but some are company cars (driven by company execs), lease returns and lemon buybacks. CarFax will show where they came from. These vehicles can be an incredible bargain in the domestic product because of the depreciation issues mentioned above. In addition, many domestic manufacturers have excellent warranties that are transferable to subsequent owners. Be aware, there may be program cars that have D & R (damage and repair) and dealers are not required to disclose this information unless the frame is damaged. Even then, it’s a good idea to request a CarFax and proceed with the mechanic inspection. Take a really close look at program vehicles as an alternative if you are looking at new. Your neighbors can’t tell the difference between a zero mile and a 10K mile car and only you will know you paid $10,000 less.
-rocky
