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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Great tips Amanda! We’ve bought both new and used cars in the past and the best line which I always use in negotiating is , ” I’ll give you my number and if it’s still here in a few weeks, give me a call.” This usually puts the salesperson in a panic and you in a strong negotiating position!
That’s a great line, Jon! Thanks for sharing. Walking away works in most cases. We were buying a mattress for my son this past weekend and as we were walking out of the store, the price of the mattress he liked dropped $150!
I didn’t buy used but I also fell for the agreeing on monthly price trick from the dealer. I ended up getting a worse interest rate. Great tips!
I’ve learned many of these tips through experience or, rather, through mistakes made when purchasing cars. It happens to all of us, Julie! Thanks for stopping by!
These are great tips, Amanda. And they’re timely for us. Your post is making me think that we are using the wrong strategy. We have only ever bought new, and in almost every case, we drive our vehicles to the grave. We have a 17-year-old van now, and in all likelihood, it will die within a year or two. We were hoping to have enough saved to buy new when that time comes. But maybe we should be proactive and start looking now for a good used car – of the model we have decided upon – so that when a decent one comes on the market, we’ll go for it. If we wait until the van dies, we’ll have put ourselves in a position to need to buy immediately – and probably buy new again. Hmmmm…. Good food for thought here. Thanks.
Thanks so much, Ruth! I’m glad you found the post useful. We’ve purchased both new and used, but haven’t ever driven a car into the grave. You guys have saved a ton of money by simply driving what you have for a long time. We intend to drive what we have now until they both die this time too. We have purchased some really good used cars that are almost new (with 25,000 miles or less) and I always felt like we got a better deal on those cars over buying new – maybe that route would be a good option for you, then you don’t take that initial hit in depreciation.
Having great negotiating skills is a great help to reducing the price. One technique I know is to have your friend call you during the meeting saying they have a better offer for you so you pretend to walk out leaving the seller in a panic where they usually offer a better deal if they are desperate to sell. Making sure a used car is in good driving shape is another major concern so that mechanic tip is key!
Oh, that’s a great technique, Stefan! I’ve never used that one – maybe next time! I actually really like the negotiating part of buying a car. My husband and I turn it into a challenge to see exactly how low we can go.
These are all good tips! We haven’t bought a car in many years, but we are pretty good about putting in the research ahead of time. Then my husband is “good cop” and I’m “bad cop” when we are actually ready to buy.
Thanks, Holly! Researching ahead of time helps tremendously and my husband researches the heck out of our car purchases. That’s funny – I’m always the “bad cop” too, but I bought the last car on my own, so the “good” cop was on the phone (which helped, I think).
I think #8 is the biggest tip! You hold all the power if you don’t need to buy that car. Then the seller has to decide if they want to risk you walking away and not finding another buyer. Nice list!
Thanks, Thias! Yes, #8 is valuable – as a potential buyer you are in control of the situation, which is incredibly powerful as far as negotiations, but also great for realizing your ability to walk away from a bad deal.
Yes! Negotiate the price. I hear of folks negotiating the payment–argh! Get the best bang for your buck by focusing on the huge amount of money you’re committing to and haggle with the best of them. 🙂
Yes, Claudia! I remember when my husband and I financed our first car together – our sole focus was to get the payment lower. We didn’t pay any attention to how much we were actually on the hook for overall. Not a good idea! Live and learn.
If you do have to finance, shop for loans before shopping for the car. If you go into the bargain with your financing lined up, you may find it easier to walk away with a good rate, even if you finance at the lot.
Also, do your research on the seller (unless it’s a private sale) as well as the car. Some dealerships offer pretty good warranties and have a good rep, others not so much.
Great advice, Emily! I completely agree. Securing financing prior to car shopping gives you bargaining power and often a better rate than you can get at a dealership. And yes, research, research, research!
I do think used cars can be great investments, but new cars aren’t so bad for the value, even though it goes down. My dad bought his truck brand new 25 years ago. He still drives it. I think the money he spent on it was a great investment. If you plan to keep the car for a long time then I think going new would be the way to go.
Thanks for your comment, Kristina! I agree, in your dad’s situation, buying new worked out very well! 25 years is a very long time to keep a vehicle! As long as you plan to keep the car for a really long time, it isn’t a bad deal to buy new. I really like buying “newer” used cars, as you still get a “new” car with just a few thousand miles on it, but that initial depreciation has already hit.
We are looking for a used car, and I agree with all these tips. Regarding driving it–drive some used cars just to get an idea of what you like. Then you can hone your search based on that info. Also, don’t be too polite when you drive it. You want to know how it handles various driving scenarios including high speeds, quick stops, etc. You don’t want to find out later when it’s your problem that it makes crazy noises and rattles over 60 mph.
When we bought our last used car, we narrowed it down to two models we would consider and drove a few. The driving was really important because we realized how well the one we bought ran compared to the others we drove. Driving on city streets as well as the freeway is important too, as you note.