Have you ever lost $2250.00 in a minute?
I’ve done it. It’s easy…just sign the paperwork for a brand new car.
Let’s say I buy a new car for $25,000. As soon as I sign the paperwork, it’s worth only $22,750 (that’s an expensive minute). After 3 years, the total market value of the car is $14,500 – a difference of $10,500.
What could you do with $10,500?
The depreciation, or loss in market value, of a new car is unquestionable. According to Edmonds.com, just one minute after buying a new car, the value drops to 91% of purchase price and after 3 years of owning a new car, the value has dropped an astounding 58%!
Yet, after that first 3 years, depreciation slows considerably. It then makes sense to cut your losses, purchase a vehicle at that sweet spot and let someone else take the hit in depreciation.
Now, I’m guilty of buying new cars in the not so distant past. But I’ve bought my fair share of used cars as well and plan to save some serious cash on future purchases by only buying used.
Though used cars can be much easier on the pocketbook, you still want to make sure you get a quality car at the best possible price.
8 tips for buying a quality used car
1. Know how much you can afford
The best way to buy a used car is to pay cash. To save for a car, “pretend” like you have a car payment, get a designated savings account solely for that purpose, and put the money in there for a year or two until you have what you need.
If you do finance a car, make sure you know how much you will be paying overall, the term and the interest rate. Track your expenses to ensure you have the money in your budget each month. Don’t let monthly payments lure you into buying more than you can afford.
2. Do your homework
Do your research to narrow your search down to a few makes/models and model years. Investigate typical problems, average price (considering how many miles it has), and vehicle options for the models under consideration.
Some used models are known to have more mechanical issues than others and, by doing your homework, you’ll know which ones to avoid.
While doing your research, know what features you want or need in a vehicle. Some models may have 4 wheel drive and others may be front wheel drive – make sure you know how to identify the vehicles with your required features.
Check reviews on the makes and models you are looking for. Though individual reviews aren’t always reliable, there is usually a consistency that can be seen throughout all reviews. If you notice that many people are having transmission issues in one model you’re considering, you will know this is something you need to either avoid or thoroughly check out on potential purchases.
3. Drive it
This may seem obvious, but cars can be like houses sometimes, where we let our emotions take over and do the deal for us. Just because a car looks nice or seems like it’s in great condition, doesn’t mean a thing. You need to drive it to make sure it fits you, runs well and doesn’t have any obvious issues.
When we were shopping for a car years ago, I liked a model I thought would be a perfect fit for our family, but the moment I drove it, I realized it didn’t fit me right, I couldn’t see well out the back window, and it felt like a rattling tin can. Driving it was the deal breaker in that situation.
4. Check vehicle history
Checking the vehicle history on cars you’re considering can save you major headaches down the road. Carfax or Autocheck are two services offering vehicle history checks. The vehicle reports use the VIN (Vehicle Identification Number – generally located on the dash under the front windshield) to do a vehicle search.
These reports reveal important information about the car, such as airbag deployment, major body damage, water damage, along with maintenance and service records. You can get some of the information free, but I recommend paying the small fee to get the full report.
We knew our last car had been in an accident because one of the panels had been repainted. After running a full report on the car, we found that the car had been hit on the rear and damage was cosmetic. Knowing what damage had been done allowed us to make a more informed decision.
5. Have your mechanic do an inspection
Don’t skip this step! Your mechanic can check for indications that maintenance has or has not been done, look for any major repair issues, and can use computerized tools alerting them to any diagnostic codes that indicate potential engine problems.
6. Don’t negotiate on payments, just price
Even if you are not paying cash, negotiate based on total cost of the vehicle. This should be part of calculating how much you can afford – even if you are financing the vehicle, you should run the numbers prior to searching for a car so you know the total cost that fits in your budget.
If you decide to finance, agree on price first and terms and conditions of the loan second. Both should be deciding factors. If you are at a dealer, they may get to your desired price, but offer you a loan with a higher interest rate (getting pre-approval from your bank prior to shopping takes care of this issue).
7. Cash is king
Never tell the seller of the car in the beginning you have the cash and don’t carry large sums of cash with you. (Safety is important – you can always go back and pay later.)
After you’ve negotiated the price down as far as you can, if you think using cash will be to your benefit, then bring it up. Depending upon the seller of the vehicle, using cash may help your negotiations (this isn’t so true of large dealerships).
When we bought my son’s used car last year, we seemed to have reached an impasse on negotiations. But when I told the used car dealer I had cash and could get it to him immediately, he dropped the price several hundred dollars.
8. Don’t be afraid to walk away
Seems easy enough, right? Not when you’re in the middle of negotiating, love the vehicle you are trying to buy, are tired of looking for a car, and feel the pressure from the salesperson. But, stick to your guns! You have done your homework and know how much you can afford, so if you cannot reach an agreement that works for you, WALK AWAY.
There will be another car. Don’t let your emotions or the pressure from the seller get to you.
We were searching for a car a few years ago and had found one we wanted, but the dealership would not come down to our budgeted price. So, we walked out. A week later, the salesperson called us and we got the deal we wanted on that vehicle.
A feeling of satisfaction comes when you know you’ve taken the necessary steps to buying an affordable, used car that will work well for you.
What other advice would you offer people searching for a used car? What experiences have taught you a lesson when buying a car?
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