This post originally appeared on The Financially Independent Millennial and has been republished with permission.
Okay, so you’re tired of puttering along in that same 1996 Honda Civic with which you picked up your Homecoming date during your senior year of high school. How do you even begin? No doubt, you’ll have questions to ask when buying a used car. Well, first, you need to narrow it down to which car you want, what options you want/can live without, your budget, etc. Once you’ve gotten that down and have taken a few cards for a spin, it’s time to get down to business.
I bought my first car just about ten years ago and have bought and sold seven cars within that time frame. Except for one, I made a profit off every single one of them. For example, My INFINITI G37 just stole my heart. I got such a good deal on it (I bought it for $4,700 under dealer internet price) that I made the conscious decision to take a loss by keeping it longer and thus having to deal with depreciation.
However, it never needed any maintenance for the six years I had it other than $40 oil changes periodically. So, considering all costs (parking, annual registration, gas, car insurance, and depreciation), the car probably cost me $150 per month over those six years. That’s well below what some friends spent on the luxury of ride-sharing.
What to Ask When Buying a New Car
When you’re ready to buy a used car, you want to come armed with questions. Ensure you’re informed, and then you come across as a knowledgeable buyer and ward off any unscrupulous sales tactics.
#7. When Is the Best Time to Buy a Used Car?
We’ve all seen those charts on the best time to buy everything from winter apparel to laptops. But did you know there is a sweet spot for buying cars, as well? Buying towards the end of the month and even the end of the year is your best bet. Why? Because dealerships have quotas to meet, salespeople are hungry to get one last commission for their paycheck.
As far as the end of the month, most dealerships close the books, project that month’s sales amounts, and try to move inventory to keep the interest fresh. You may know that when new models come out and leases get returned, the used car market is usually more flexible, which means more selection and a better price for you.
If you’re daring, go into the dealership on a Sunday evening during unpleasant weather when they’re hungry to meet quotas. If you’re paying cash, and you’re there with money in hand, they’re much more likely to get you a good deal. Make sure you come with evidence of comparable models elsewhere.
#6. Why Is Buying Used Better Than New?
While many people justify their decision to buy new as having a more reliable vehicle and spending less on repairs than an older car, cars have markedly improved their dependability over the last 10-15 years.
Plus, many online tools help you with price transparency, find service records, and owner/expert reviews. You’ll find anything you want to know about the car you’re considering over the last decade.
According to a recent report, new cars lose up to 20% of their value after the first year. And then they depreciate more than HALF their value after five years. On a $32,000 car, that’s almost a $7,000 hit after just a year of driving! On the other hand, you can easily buy a car that’s just a few years old and let someone else take the depreciation hit.
Besides houses, cars are generally the most expensive purchases you’ll make. Buying used enables you to strategically get a reliable vehicle that can last you years without breaking the bank. My neighbor once bought a 4-year-old Honda Accord for $12,000 and still drives it ten years and 90,000 miles on the odometer later!
#5. Why Is Buying Better Than Leasing?
According to Consumer Reports’ comparison for buying versus leasing, the average cost of a new car has now topped $38,000. You might think to yourself, “I don’t have $38,000 laying around!” Well, take a step back and a deep breath, realizing this is average. Meaning, you can easily find cars for less than this amount. Plus, just another reason to look at a mint used car!
Leases can be appealing because they enable the consumer to drive a new car for a monthly lease payment. Lenders are happy to collect the interest! And then, you return the vehicle at the end of the lease without worrying about maintenance or repairs. Leasing is ideal for people who like to have the newest car (and can afford it) or deduct leasing expenses like realtors. And yes, if you’re wondering about this question, you can lease a used car as well. However, there are mileage limits, and if you lose your job or have a child, you typically can’t just hand the keys back without penalty.
Buying a car means you can drive it freely and have something of value that you can sell when the need arises. With leasing a vehicle, you typically have to either return it, have nothing at the end of the lease, or pay off the car at an agreed-upon amount when you lease the vehicle. For these reasons, buying a car is the best option for most people.
#4. How Many Miles Should a Used Car Have?
Congratulations, we’ve convinced you to buy used! Well, hopefully, you’re empowered to ask questions and find and buy a quality used car, over lining the dealership’s pockets with a new one. Mileage is an essential factor to consider, and the lower mileage, the better. Think about it, cars don’t run forever. So, there’s a cap on mileage before the vehicle is pretty much worthless. (though if you want to see some impressive machines with millions, yes millions of miles, check out this car.)
Most people drive about 10-12,000 miles per year. And with ever-changing technology, it might be best to keep it under 100,000 if you plan to keep the car for a while. After 100,000 miles, more expensive servicing like timing belt change, transmission replacement, and electrical repairs come along.
Consumers who question a used car’s value can turn to The Kelley blue book as an excellent resource when buying or selling. I have found that buying cars with low-mileage, i.e., under 30,000, is the sweet spot if you can snag a good deal because it still feels new. These cars usually come with the balance of a new or extended warranty and yet have decent value locked in. Bonus points if you flip it a year later for a profit as I did!
#3. What Are the Benefits of Buying a Used Car from a Dealer?
You can compare buying a certified pre-owned (aka used car) from a dealer instead of a private party to purchasing a laptop from the store versus a seller on Amazon. You typically get more hand-holding and a concierge process with inspection of the car, service and registration assistance, etc. Yet, that comes with a price.
Buying a used car from a dealer means there’s no question: they have to stand behind that car and not sell you a lemon because their reputation lies on that. So, peace of mind is a big plus when it comes to buying from a dealer. Also, you can typically find more variety in what you want and have someone reach out to you when they get something closer to what you’re looking for. You can also negotiate free service for a year, a multi-point inspection, printouts of service records, and things like replacing the tires at a reduced cost. Moreover, suppose haggling, negotiations, or dealing with salespeople make your stomach churn. In that case, you can always pay a slight premium for peace of mind by using a service like Carvana or Carmax.
Buying from a dealer can also help you make sure you get your title and tag done correctly. One thing to look out for is some dealerships charge a Dealer or “Document Preparation” fee, which can be hundreds of dollars in some states. Be sure to understand what value they’re providing for that fee and where it goes. Few waive them and even charge their employees that fee.
#2. What Are the Benefits of Buying a Used Car Privately?
How do you save the MOST amount of money when buying a car? Well, you buy a pre-owned vehicle that already got whacked with depreciation and cut out the middleman. By middleman, I mean the dealership.
Now, you read about the perks of buying through a dealer and all the peace of mind it brings. So, why bother dealing with the hassle and uncertainty of a private party? Well, the significant cost savings, of course! There’s no dealer doc prep fee, no markups to pay for payroll or overhead, and no burdensome certification process. Buying a used car privately gives you the best chance of getting a great deal if you ask the right questions.
In simpler times, a handshake and trust were all we had to go off before things like CARFAX reports and AutoCheck. When you find a private seller, you can find out the vehicle history. For example, if they were the original owner, who drove the car, why they bought it, and how it’s been treated over the years. Also, you’ll have to make sure they have the title free and clear. Otherwise, you’ll want to go to the bank and have them call the company that holds the title to make sure the loan gets paid off before any other money changes hands.
#1. What Are the Best Ways to Find a Used Car?
Now how do you go about finding a used car? There are many more online tools at our disposal than ever before. Do you remember the times when you would flip to the classified section of the newspaper to find boxes of 6 point font describing a car for sale? Or you saw a car parked on the road with a “For Sale” sign? How times have changed.
Now, you can easily find any car you want online, know everything about it, see high-resolution pictures of its every angle. And you don’t even have to limit yourself to your geographic area!
The thing to know is most private-party sellers will usually try to sell their car for free or cheaply. So, be sure to start your search by scanning Craigslist, Cars.com, and Facebook Marketplace.
Expand Your Search
Now, if you’re looking to expand your search across the state or nation, check out cars.com, Cargurus.com, and Truecar.com. All of these sites provide decent vehicle descriptions and history, such as accident reports.
Cars.com has a very user-friendly interface and easy navigation filters for color, features, cloth/leather, etc. It also has a price analysis tool to let you know if that particular car is a “good” or “great price” as compared to other vehicles for sale.
CarGurus is also user-friendly and has a similar price comparison tool. Also, it’s got a cool little “negotiation” section in the description. It tells you how long the car has been on the market and its different price changes. It can give you a glimpse of how motivated the dealer is to get rid of the vehicle. I love CarGurus because it answers the most basic questions I’d ask about the used car I’m thinking about buying.
Finally, TrueCar has a unique pricing analytics report that will tell you what you can expect to pay based on what similar vehicles have sold for. They also can offer a unique “personalized offer” on a car, which might be lower than other sites, in exchange for inputting your contact information. It might be an easy trade to shave a few hundred off your car purchase!
Final Thoughts about Buying A Used Car
Consumers looking to buy a used car certainly have to ask a lot more questions than when buying new. But, the extra work will save them thousands in unnecessary depreciation. The key is to do your homework and get the car inspected. That way, you’ll come out ahead by knowing the car’s history. And don’t be afraid (ever) to walk away from a bad deal!